Bravura Solutions Limited (ASX:BVS) Stock Goes Ex-Dividend In Just 4 Days

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Bravura Solutions Limited (ASX:BVS) is about to go ex-dividend in just 4 days. If you purchase the stock on or after the 3rd of March, you won't be eligible to receive this dividend, when it is paid on the 27th of March.

Bravura Solutions's upcoming dividend is AU$0.055 a share, following on from the last 12 months, when the company distributed a total of AU$0.10 per share to shareholders. Looking at the last 12 months of distributions, Bravura Solutions has a trailing yield of approximately 2.3% on its current stock price of A$4.56. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Bravura Solutions has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Bravura Solutions

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Bravura Solutions is paying out an acceptable 66% 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. Bravura Solutions paid out more free cash flow than it generated - 152%, to be precise - last year, which we think is concerningly high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.

While Bravura Solutions's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were Bravura Solutions to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Bravura Solutions has grown its earnings rapidly, up 41% 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. It's hard to grow dividends per share when a company keeps creating new shares.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, three years ago, Bravura Solutions has lifted its dividend by approximately 32% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

Is Bravura Solutions an attractive dividend stock, or better left on the shelf? It's good to see that earnings per share are growing and that the company's payout ratio is within a normal range for most businesses. However we're somewhat concerned that it paid out 152% of its cashflow, which is uncomfortably high. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

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

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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

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