Brookfield Business (NYSE:BBUC) Will Pay A Dividend Of $0.0625

Brookfield Business Corporation's (NYSE:BBUC) investors are due to receive a payment of $0.0625 per share on 29th of September. The dividend yield is 1.2% based on this payment, which is a little bit low compared to the other companies in the industry.

View our latest analysis for Brookfield Business

Brookfield Business' Earnings Easily Cover The Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, Brookfield Business' earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, EPS could fall by 61.6% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could be 19%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Brookfield Business Doesn't Have A Long Payment History

It's not possible for us to make a backward looking judgement just based on a short payment history. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

The Dividend Has Limited Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. Over the last year, Brookfield Business' EPS has fallen by 62%. A large drop like this could indicate a major challenge in the business, and could certainly flow through to reduced dividend payments. However, we would never make any decisions based on only a single year of data, especially when assessing long term dividend potential.

Brookfield Business' Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Brookfield Business' payments, as there could be some issues with sustaining them into the future. While Brookfield Business is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Brookfield Business has 3 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. Is Brookfield Business not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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