Bravura Solutions Limited (ASX:BVS) Pays A AU$0.026 Dividend In Just Two Days

Bravura Solutions Limited (ASX:BVS) is about to trade ex-dividend in the next 2 days. You will need to purchase shares before the 3rd of March to receive the dividend, which will be paid on the 26th of March.

Bravura Solutions's next dividend payment will be AU$0.026 per share, and in the last 12 months, the company paid a total of AU$0.081 per share. Looking at the last 12 months of distributions, Bravura Solutions has a trailing yield of approximately 3.0% on its current stock price of A$2.73. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Bravura Solutions

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. Bravura Solutions is paying out an acceptable 68% of its profit, a common payout level among most companies. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out an unsustainably high 203% of its free cash flow as dividends over the past 12 months, which is worrying. Our definition of free cash flow excludes cash generated from asset sales, so since Bravura Solutions is paying out such a high percentage of its cash flow, it might be worth seeing if it sold assets or had similar events that might have led to such a high dividend payment.

Bravura Solutions paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Bravura Solutions's ability to maintain its dividend.

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

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. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Bravura Solutions has grown its earnings rapidly, up 35% a year for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

We'd also point out that Bravura Solutions issued a meaningful number of new shares in the past year. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Bravura Solutions has delivered an average of 16% per year annual increase in its dividend, based on the past four years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

Is Bravura Solutions worth buying for its dividend? Earnings per share growth is a positive, and the company's payout ratio looks normal. However, we note Bravura Solutions paid out a much higher percentage of its free cash flow, which makes us uncomfortable. Overall, it's hard to get excited about Bravura Solutions from a dividend perspective.

If you want to look further into Bravura Solutions, it's worth knowing the risks this business faces. In terms of investment risks, we've identified 2 warning signs with Bravura Solutions and understanding them should be part of your investment process.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

This article by Simply Wall St is general in nature. 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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