Brook Crompton Holdings (SGX:AWC) Will Pay A Dividend Of SGD0.02

The board of Brook Crompton Holdings Ltd. (SGX:AWC) has announced that it will pay a dividend on the 30th of May, with investors receiving SGD0.02 per share. This payment means the dividend yield will be 3.9%, which is below the average for the industry.

Check out our latest analysis for Brook Crompton Holdings

Brook Crompton Holdings' Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, prior to this announcement, Brook Crompton Holdings' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share could rise by 2.9% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 15% by next year, which we think can be pretty sustainable going forward.

Brook Crompton Holdings' Dividend Has Lacked Consistency

It's comforting to see that Brook Crompton Holdings has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. There hasn't been much of a change in the dividend over the last 7 years. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings have grown at around 2.9% a year for the past five years, which isn't massive but still better than seeing them shrink. If Brook Crompton Holdings is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Our Thoughts On Brook Crompton Holdings' Dividend

Overall, we think Brook Crompton Holdings is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for Brook Crompton Holdings (1 is significant!) that you should be aware of before investing. Is Brook Crompton Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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