Brimstone Investment's (JSE:BRT) Dividend Will Be ZAR0.40

The board of Brimstone Investment Corporation Limited (JSE:BRT) has announced that it will pay a dividend on the 22nd of April, with investors receiving ZAR0.40 per share. This makes the dividend yield 8.3%, which will augment investor returns quite nicely.

See our latest analysis for Brimstone Investment

Brimstone Investment's Distributions May Be Difficult To Sustain

A big dividend yield for a few years doesn't mean much if it can't be sustained. Even though Brimstone Investment is not generating a profit, it is still paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.

Looking forward, earnings per share could rise by 6.6% over the next year if the trend from the last few years continues. This is the right direction to be moving, but it is probably not enough to achieve profitability. Unfortunately, for the dividend to continue at current levels the company definitely needs to get there sooner rather than later.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was ZAR0.30, compared to the most recent full-year payment of ZAR0.40. This works out to be a compound annual growth rate (CAGR) of approximately 2.9% 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.

Brimstone Investment Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Brimstone Investment has seen EPS rising for the last five years, at 6.6% per annum. It's not great that the company is not turning a profit, but the decent growth in recent years is certainly a positive sign. If the company can become profitable soon, continuing on this trajectory would bode well for the future of the dividend.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The track record isn't great, and the payments are a bit high to be considered sustainable. We don't think Brimstone Investment is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Brimstone Investment has 3 warning signs (and 2 which are potentially serious) we think you should know about. Is Brimstone Investment not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.