The board of Brickworks Limited (ASX:BKW) has announced that it will pay a dividend on the 1st of May, with investors receiving A$0.25 per share. This makes the dividend yield about the same as the industry average at 2.8%.

Brickworks' Projections Indicate Future Payments May Be Unsustainable

Estimates Indicate Brickworks' Could Struggle to Maintain Dividend Payments In The Future

Brickworks' Future Dividends May Potentially Be At Risk

We aren't too impressed by dividend yields unless they can be sustained over time. Brickworks is unprofitable despite paying a dividend, and it is paying out 202% of its free cash flow. These payout levels would generally be quite difficult to keep up.

Over the next year, EPS is forecast to expand by 168.7%. If the dividend continues on its recent course, the company could be paying out several times what it earns in the next 12 months, which could start applying pressure to the balance sheet.ASX:BKW Historic Dividend March 24th 2025

Check out our latest analysis for Brickworks

Brickworks Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of A$0.42 in 2015 to the most recent total annual payment of A$0.67. This works out to be a compound annual growth rate (CAGR) of approximately 4.8% a year over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

The Dividend Has Limited Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. Over the past five years, it looks as though Brickworks' EPS has declined at around 15% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

The Dividend Could Prove To Be Unreliable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Brickworks that investors should take into consideration. 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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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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