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Bravura Solutions (ASX:BVS) Will Pay A Smaller Dividend Than Last Year

Bravura Solutions Limited (ASX:BVS) has announced that on 29th of September, it will be paying a dividend ofA$0.032, which a reduction from last year's comparable dividend. This means the annual payment is 4.3% of the current stock price, which is above the average for the industry.

See our latest analysis for Bravura Solutions

Bravura Solutions' Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Bravura Solutions' dividend was only 57% of earnings, however it was paying out 109% of free cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

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Over the next year, EPS is forecast to expand by 6.9%. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 79% - on the higher side, but we wouldn't necessarily say this is unsustainable.

historic-dividend
historic-dividend

Bravura Solutions' Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of A$0.045 in 2017 to the most recent total annual payment of A$0.069. This means that it has been growing its distributions at 8.9% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Has Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Bravura Solutions has seen EPS rising for the last five years, at 9.1% per annum. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

In Summary

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. While Bravura Solutions is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Bravura Solutions that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield 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.

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