Here's What We Like About Brady's (NYSE:BRC) Upcoming Dividend

It looks like Brady Corporation (NYSE:BRC) is about to go ex-dividend in the next 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Therefore, if you purchase Brady's shares on or after the 6th of April, you won't be eligible to receive the dividend, when it is paid on the 28th of April.

The company's next dividend payment will be US$0.23 per share, and in the last 12 months, the company paid a total of US$0.92 per share. Last year's total dividend payments show that Brady has a trailing yield of 1.7% on the current share price of $53.73. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Brady has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Brady

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. That's why it's good to see Brady paying out a modest 29% of its earnings. A useful secondary check can be to evaluate whether Brady generated enough free cash flow to afford its dividend. Fortunately, it paid out only 39% of its free cash flow in the past year.

It's positive to see that Brady'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.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. 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, Brady's earnings per share have been growing at 11% a year for the past five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Brady has delivered 2.2% dividend growth per year on average over the past 10 years. Earnings per share have been growing much quicker than dividends, potentially because Brady is keeping back more of its profits to grow the business.

To Sum It Up

Has Brady got what it takes to maintain its dividend payments? We love that Brady is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. It's a promising combination that should mark this company worthy of closer attention.

Curious what other investors think of Brady? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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