Readers hoping to buy Brimstone Investment Corporation Limited (JSE:BRT) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase Brimstone Investment's shares before the 19th of April in order to be eligible for the dividend, which will be paid on the 24th of April.
The company's next dividend payment will be R0.33 per share. Last year, in total, the company distributed R0.33 to shareholders. Last year's total dividend payments show that Brimstone Investment has a trailing yield of 5.8% on the current share price of ZAR5.72. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Brimstone Investment has been able to grow its dividends, or if the dividend might be cut.
Check out 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 a comfortable 43% of its profit last year. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Thankfully its dividend payments took up just 44% of the free cash flow it generated, which is a comfortable payout ratio.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see how much of its profit Brimstone Investment paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Brimstone Investment's earnings have been skyrocketing, up 32% per annum for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.