Brimstone Investment (JSE:BRT) Has Announced That It Will Be Increasing Its Dividend To ZAR0.33

Brimstone Investment Corporation Limited's (JSE:BRT) periodic dividend will be increasing on the 24th of April to ZAR0.33, with investors receiving 10% more than last year's ZAR0.30. This makes the dividend yield about the same as the industry average at 4.8%.

Check out our latest analysis for Brimstone Investment

Brimstone Investment's Payment Has Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. However, Brimstone Investment's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 59.3% if recent trends continue. If the dividend continues on this path, the payout ratio could be 15% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the annual payment back then was ZAR0.25, compared to the most recent full-year payment of ZAR0.30. This works out to be a compound annual growth rate (CAGR) of approximately 1.8% a year over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Brimstone Investment has grown earnings per share at 59% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like Brimstone Investment's Dividend

Overall, a dividend increase is always good, and we think that Brimstone Investment is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 6 warning signs for Brimstone Investment (2 are a bit unpleasant!) that you should be aware of before investing. Is Brimstone Investment not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.