Brimstone Investment Corporation Limited's (JSE:BRT) dividend will be increasing from last year's payment of the same period to ZAR0.33 on 24th of April. The payment will take the dividend yield to 5.2%, which is in line with the average for the industry.
Check out our latest analysis for Brimstone Investment
Brimstone Investment's Dividend Is Well Covered By Earnings
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. The last dividend was quite easily covered by Brimstone Investment's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
If the trend of the last few years continues, EPS will grow by 32.0% over the next 12 months. If the dividend continues on this path, the payout ratio could be 31% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2013, the dividend has gone from ZAR0.25 total annually to ZAR0.33. This means that it has been growing its distributions at 2.8% per annum 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
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Brimstone Investment has impressed us by growing EPS at 32% per year over the past five years. Brimstone Investment is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.
Brimstone Investment Looks Like A Great Dividend Stock
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. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 5 warning signs for Brimstone Investment (1 shouldn't be ignored!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.