Stock Analysis

Brimstone Investment (JSE:BRT) Could Be A Buy For Its Upcoming Dividend

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It looks like Brimstone Investment Corporation Limited (JSE:BRT) is about to go ex-dividend in the next three days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase Brimstone Investment's shares before the 20th of April in order to receive the dividend, which the company will pay on the 25th of April.

The company's next dividend payment will be R0.30 per share, and in the last 12 months, the company paid a total of R0.30 per share. Looking at the last 12 months of distributions, Brimstone Investment has a trailing yield of approximately 4.3% on its current stock price of ZAR7. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Brimstone Investment

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Brimstone Investment paid out just 13% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.

Click here to see how much of its profit Brimstone Investment paid out over the last 12 months.

JSE:BRT Historic Dividend April 16th 2022

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Brimstone Investment has grown its earnings rapidly, up 28% a year for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Brimstone Investment looks like a promising growth company.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Brimstone Investment has delivered 5.2% dividend growth per year on average over the past 10 years. Earnings per share have been growing much quicker than dividends, potentially because Brimstone Investment is keeping back more of its profits to grow the business.

The Bottom Line

Is Brimstone Investment an attractive dividend stock, or better left on the shelf? Companies like Brimstone Investment that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. In summary, Brimstone Investment appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

So while Brimstone Investment looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, Brimstone Investment has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

Valuation is complex, but we're helping make it simple.

Find out whether Brimstone Investment is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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Brimstone Investment

Brimstone Investment Corporation Limited, an investment holding company, engages in the food, healthcare, property, restricted B-BBEE, and enterprise development businesses in South Africa and internationally.

Second-rate dividend payer and slightly overvalued.