Just Three Days Till Brunswick Corporation (NYSE:BC) Will Be Trading Ex-Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Brunswick Corporation (NYSE:BC) is about to go ex-dividend in just three days. The ex-dividend date is usually set to be one business day before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least one business day to settle. Thus, you can purchase Brunswick's shares before the 19th of May in order to receive the dividend, which the company will pay on the 13th of June.

The company's next dividend payment will be US$0.43 per share. Last year, in total, the company distributed US$1.72 to shareholders. Looking at the last 12 months of distributions, Brunswick has a trailing yield of approximately 3.3% on its current stock price of US$52.16. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

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Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Brunswick distributed an unsustainably high 111% of its profit as dividends to shareholders last year. Without extenuating circumstances, we'd consider the dividend at risk of a cut. A useful secondary check can be to evaluate whether Brunswick generated enough free cash flow to afford its dividend. It distributed 28% of its free cash flow as dividends, a comfortable payout level for most companies.

It's disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and Brunswick fortunately did generate enough cash to fund its dividend. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Very few companies are able to sustainably pay dividends larger than their reported earnings.

View our latest analysis for Brunswick

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Brunswick has grown its earnings rapidly, up 34% a year for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Brunswick has delivered an average of 13% per year annual increase in its dividend, based on the past 10 years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Is Brunswick worth buying for its dividend? Earnings per share have been rising nicely although, even though its cashflow payout ratio is low, we question why Brunswick is paying out so much of its profit. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Brunswick's dividend merits.

So while Brunswick looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example - Brunswick has 5 warning signs we think you should be aware of.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.