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Big River Industries (ASX:BRI) Could Be A Buy For Its Upcoming Dividend


It looks like Big River Industries Limited (ASX:BRI) is about to go ex-dividend in the next four 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. Therefore, if you purchase Big River Industries’ shares on or after the 4th of March, you won’t be eligible to receive the dividend, when it is paid on the 27th of March.

The company’s upcoming dividend is AU$0.055 a share, following on from the last 12 months, when the company distributed a total of AU$0.11 per share to shareholders. Based on the last year’s worth of payments, Big River Industries has a trailing yield of 6.2% on the current stock price of AU$1.765. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That’s why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Big River Industries

If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Big River Industries is paying out an acceptable 71% of its profit, a common payout level among most companies. 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 distributed 37% of its free cash flow as dividends, a comfortable payout level for most companies.

It’s positive to see that Big River Industries’s dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.

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historic-dividend

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it’s easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Big River Industries’s earnings per share have been growing at 15% a year for the past five years. Big River Industries has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. Big River Industries has delivered an average of 18% per year…

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