Yahoo Finance Brambles (ASX:BXB) Has Announced That It Will Be Increasing Its Dividend To AU$0.14
Brambles Limited's (ASX:BXB) dividend will be increasing to AU$0.14 on 14th of October. Based on the announced payment, the dividend yield for the company will be 2.2%, which is fairly typical for the industry.
Check out our latest analysis for Brambles
Brambles' Dividend Is Well Covered By Earnings
Unless the payments are sustainable, the dividend yield doesn't mean too much. However, prior to this announcement, Brambles' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.
Over the next year, EPS is forecast to expand by 10.1%. If the dividend continues on this path, the payout ratio could be 64% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from US$0.23 in 2011 to the most recent annual payment of US$0.15. The dividend has shrunk at around 4.2% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
Dividend Growth May Be Hard To Achieve
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. Although it's important to note that Brambles' earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.
Our Thoughts On Brambles' Dividend
In summary, while it's always good to see the dividend being raised, we don't think Brambles' payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Brambles 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Brambles that you should be aware of before investing. We have also put together a list of global stocks with a solid dividend.
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.
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