The board of Brickworks Limited (ASX:BKW) has announced that it will be paying its dividend of A$0.43 on the 27th of November, an increased payment from last year's comparable dividend. Based on this payment, the dividend yield for the company will be 2.3%, which is fairly typical for the industry.

Check out our latest analysis for Brickworks

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

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. The company is paying out a large amount of its cash flows, even though it isn't generating any profit. This makes us feel that the dividend will be hard to maintain.

Earnings per share is forecast to rise by 177.3% over the next year. If the dividend continues on its recent course, the payout ratio in 12 months could be 118%, which is a bit high and could start applying pressure to the balance sheet. historic-dividend

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 2014 to the most recent total annual payment of A$0.67. This means that it has been growing its distributions at 4.8% per annum over that time. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

Brickworks May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. Brickworks has seen earnings per share falling at 2.4% per year over the last five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. 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 can turn into a longer 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. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We don't think Brickworks is a great stock to add to your portfolio if income is your focus.



Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Given that earnings are not growing, the dividend does not look nearly so attractive. Very few businesses see earnings consistently shrink year after year in perpetuity though, and so it might be worth seeing what the 9 analysts we track are forecasting for the future. Is Brickworks not quite the opportunity you were looking for? Why not check out our selection of top 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.