BRC Asia (SGX:BEC) Is Increasing Its Dividend To SGD0.14

BRC Asia Limited (SGX:BEC) will increase its dividend from last year's comparable payment on the 15th of May to SGD0.14. This takes the dividend yield to 7.6%, which shareholders will be pleased with.

View our latest analysis for BRC Asia

BRC Asia's Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite easily covered by BRC Asia's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to fall by 5.1%. If the dividend continues along recent trends, we estimate the payout ratio could be 69%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was SGD0.085, compared to the most recent full-year payment of SGD0.22. This works out to be a compound annual growth rate (CAGR) of approximately 10.0% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. BRC Asia might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. BRC Asia has seen EPS rising for the last five years, at 20% per annum. BRC Asia is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

BRC Asia Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for BRC Asia (of which 1 makes us a bit uncomfortable!) you should know about. Is BRC Asia not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.