Brookfield Business Corporation (NYSE:TSX:BBUC) is set to distribute a $0.0625 per share dividend on December 29th, which will raise the yield to 1.5%. This announcement comes despite concerns about the sustainability of its dividends due to negative free cash flows and a brief history of dividend payments.
The company's earnings are sufficient to cover the current dividend, but the expected 65.6% drop in earnings per share (EPS) within the next year could lower the payout ratio to around 20%. This is further complicated by a significant 66% EPS decline over the past year, hinting at limited growth potential and raising further doubts about the long-term viability of the current dividend level.
Brookfield's short dividend-paying history and negative cash flows are among the key factors that investors need to consider. These, along with three undisclosed warning signs, make the stock potentially risky for investors who rely solely on dividends for returns.
The sustainability of Brookfield's current dividends remains uncertain due to these factors, casting a shadow over the company's status on NYSE:BBUC. Despite this, an estimated payout ratio of 20% seems feasible, albeit with caution due to Brookfield's significant EPS drop and predicted decrease within a year.
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