04-04-2025
Brimstone Investment (JSE:BRT) Will Pay A Dividend Of ZAR0.40
The board of Brimstone Investment Corporation Limited (JSE:BRT) has announced that it will pay a dividend of ZAR0.40 per share on the 22nd of April. This means the annual payment is 9.1% of the current stock price, which is above the average for the industry.
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While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Despite not generating a profit, Brimstone Investment is still paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.
Looking forward, earnings per share could rise by 6.6% over the next year if the trend from the last few years continues. The company seems to be going down the right path, but it will probably take a little bit longer than a year to cross over into profitability. Unfortunately, for the dividend to continue at current levels the company definitely needs to get there sooner rather than later.
View our latest analysis for Brimstone Investment
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was ZAR0.50, compared to the most recent full-year payment of ZAR0.40. This works out to be a decline of approximately 2.2% per year over that time. 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.
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Brimstone Investment has been growing its earnings per share at 6.6% a year over the past five years. Unprofitable companies aren't normally our pick for a dividend stock, but we like the growth that we have been seeing. All is not lost, but the future of the dividend definitely rests upon the company's ability to become profitable soon.
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Brimstone Investment's payments, as there could be some issues with sustaining them into the future. The track record isn't great, and the payments are a bit high to be considered sustainable. We would be a touch cautious of relying on this stock primarily for the dividend income.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for Brimstone Investment (of which 2 are a bit unpleasant!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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