BRC Asia's (SGX:BEC) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of BRC Asia Limited (SGX:BEC) has announced that it will be paying its dividend of SGD0.14 on the 15th of May, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 8.5%, providing a nice boost to shareholder returns.

See our latest analysis for BRC Asia

BRC Asia's Payment Could Potentially Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, BRC Asia's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

EPS is set to fall by 5.1% over the next 12 months. 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

While the company has been paying a dividend for a long time, it has cut the dividend at least once 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. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. BRC Asia has seen EPS rising for the last five years, at 20% per annum. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that BRC Asia could prove to be a strong dividend payer.

BRC Asia Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for BRC Asia (of which 1 doesn't sit too well with us!) 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.