Balwin Properties (JSE:BWN) Is Increasing Its Dividend To ZAR0.141

The board of Balwin Properties Limited (JSE:BWN) has announced that it will be increasing its dividend by 4.4% on the 26th of June to ZAR0.141, up from last year's comparable payment of ZAR0.135. This takes the dividend yield to 8.4%, which shareholders will be pleased with.

Check out our latest analysis for Balwin Properties

Balwin Properties' Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Balwin Properties was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

EPS is set to fall by 2.1% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 24%, which is definitely feasible to continue.

Balwin Properties' Dividend Has Lacked Consistency

Looking back, Balwin Properties' dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2016, the annual payment back then was ZAR0.42, compared to the most recent full-year payment of ZAR0.234. The dividend has shrunk at around 8.0% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth May Be Hard To Achieve

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Balwin Properties has seen earnings per share falling at 2.1% per year over the last five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

Our Thoughts On Balwin Properties' Dividend

In summary, while it's always good to see the dividend being raised, we don't think Balwin Properties' payments are rock solid. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. For example, we've identified 5 warning signs for Balwin Properties (2 are significant!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of 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.