Yahoo Finance Why It Might Not Make Sense To Buy Bridgemarq Real Estate Services Inc. (TSE:BRE) For Its Upcoming Dividend
It looks like Bridgemarq Real Estate Services Inc. (TSE:BRE) is about to go ex-dividend in the next two days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. 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. Thus, you can purchase Bridgemarq Real Estate Services' shares before the 29th of April in order to receive the dividend, which the company will pay on the 31st of May.
The company's upcoming dividend is CA$0.1125 a share, following on from the last 12 months, when the company distributed a total of CA$1.35 per share to shareholders. Based on the last year's worth of payments, Bridgemarq Real Estate Services stock has a trailing yield of around 9.9% on the current share price of CA$13.65. 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 Bridgemarq Real Estate Services has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for Bridgemarq Real Estate Services
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Bridgemarq Real Estate Services paid out a disturbingly high 320% of its profit as dividends last year, which makes us concerned there's something we don't fully understand in the business. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out 100% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Companies usually need cash more than they need earnings - expenses don't pay themselves - so it's not great to see it paying out so much of its cash flow.
As Bridgemarq Real Estate Services's dividend was not well covered by either earnings or cash flow, we would be concerned that this dividend could be at risk over the long term.
Click here to see how much of its profit Bridgemarq Real Estate Services paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Bridgemarq Real Estate Services's earnings per share have fallen at approximately 25% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Bridgemarq Real Estate Services has delivered an average of 2.0% per year annual increase in its dividend, based on the past 10 years of dividend payments. That's intriguing, but the combination of growing dividends despite declining earnings can typically only be achieved by paying out a larger percentage of profits. Bridgemarq Real Estate Services is already paying out 320% of its profits, and with shrinking earnings we think it's unlikely that this dividend will grow quickly in the future.
To Sum It Up
Is Bridgemarq Real Estate Services an attractive dividend stock, or better left on the shelf? Not only are earnings per share declining, but Bridgemarq Real Estate Services is paying out an uncomfortably high percentage of both its earnings and cashflow to shareholders as dividends. Unless there are grounds to believe a turnaround is imminent, this is one of the least attractive dividend stocks under this analysis. It's not that we think Bridgemarq Real Estate Services is a bad company, but these characteristics don't generally lead to outstanding dividend performance.
With that in mind though, if the poor dividend characteristics of Bridgemarq Real Estate Services don't faze you, it's worth being mindful of the risks involved with this business. For example, Bridgemarq Real Estate Services has 6 warning signs (and 4 which are a bit concerning) we think you should know about.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.
