Did you know that Brickworks Limited (ASX: BKW) hasn’t cut its dividend in more than four decades?
Many ASX shares cut (or at least deferred) their dividends in 2020 because of the global COVID-19 pandemic. Brickworks said it was proud to be one of the very few S&P/ASX 200 Index (ASX: XJO) companies that increased dividends during the pandemic. Brickworks also didn’t raise capital or receive government support payments during the COVID-19 period.
Lots of businesses also cut their dividends during the GFC, but Brickworks did not.
Brickworks boasts of a long history of dividend growth. It has been 44 years since dividends were last decreased in 1976.
An overview of Brickworks
Brickworks has been a leading building products for many decades. It has a number of bricks brands including Austral Bricks, Bowral Bricks and Daniel Robertson. Brickworks also operates in other Australian building products categories including precast, paving, masonry and roofing.
It has also quickly become the market leader for bricks in the north east of the United States after making three acquisitions including Glen Gery.
There are two other segments to its business. The first is that it owns 50% of an industrial property trust along with Goodman Group (ASX: GMG). Brickworks sells excess land that it had previously used into the JV property trust so that the land can be used for building industrial properties.
Both Amazon and Coles Group Ltd (ASX: COL) will soon be tenants for the property trust which is building large distribution centres for those retail giants to use and rent. Following the completion of these two facilities, the gross assets held within the various JV trust assets across Western Sydney and Brisbane is expected by Brickworks to exceed $3 billion.
The final division is its investment holding of Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) shares. It owns around 40% of Soul Patts. Brickworks says that Soul Patts has a diversified portfolio of assets and has a proven investment approach that has delivered “outstanding” returns over the long-term. At the time of Brickworks reporting its FY20 result, Soul Patts had delivered annualised total returns of 12.7% per annum over the past 20 years, which represented outperformance of 5.2% per annum compared to the ASX All Ordinaries Accumulation Index.
As mentioned above, Brickworks has maintained or grown its dividend every year for over four decades.
Brickworks says that its dividend is funded entirely from the distributions from the property trust JV as well as the dividends from Soul Patts. The property trust keeps growing its net rental profit and Soul Patts keep increasing its dividend, which allows Brickworks to continue to grow its dividend. it doesn’t need any building products cashflow to pay its current dividend.
The ASX dividend share increased its FY20 dividend by 3.5% to $0.59 per share. At the current Brickworks share price, that amounts to a grossed-up dividend yield of 4.3%.
The Motley Fool Dividend Investor service commented on Brickworks’ in its latest buy recommendation of the company: “This, along with the diversified nature of its assets, is one of the key reasons behind the company’s incredible decades-long dividend paying track record. In the current low interest rate environment, the size and reliability of its dividend should prove to be attractive for those investors looking for a reliable income stream.
“Brickworks offers a compelling dividend investment opportunity. Combining its strong market positions, a quality management team, shareholder base and a solid balance sheet”.
The Dividend Investor service still rates Brickworks as a buy.