The Brickworks dividend just got a boost, so why is the share price tanking?

This stock continues to build its dividend.

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The Brickworks Limited (ASX: BKW) dividend just saw another increase after the FY23 result was released to the market. Despite that, the Brickworks share price is down over 6%.

The business hasn't cut its dividend for 47 years. In other words, it has been stable or grown for almost five decades in a row. This payout also represented the tenth year in a row of consecutive annual dividend increases.

Let's look at some of the main details of the dividend.

Brickworks FY23 final dividend

The board of Brickworks decided to declare a final dividend of 42 cents per share, which was 1 cent per share, or 2%, bigger than the FY22 final dividend.

This brought the full-year dividend to $0.65, an increase of 3% year over year.

The ex-dividend date for the upcoming final dividend is 31 October 2023, which means investors need to own shares for entitlement by the end of trading on 30 October 2023.

The payment date for this dividend is 22 November 2023, so shareholders will get their dividend payment in less than two months from now.

Will shareholder payouts continue to grow?

The Brickworks dividends are funded by dividend payments from Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) (which continues to grow) and the net rental profit from its property trusts.

In FY23, Brickworks saw the net trust income grow by 37% to $50 million, including $9 million of net rent from the Brickworks Manufacturing Trust, which was launched in July 2022.

Regarding the rental profit, the Brickworks managing director Lindsay Partridge said:

Despite increasing interest rates, we are continuing to experience strong demand for medium and large sized prime industrial property. Sydney has the tightest logistics property market of any major city in the world, with a vacancy rate of just 0.2%. Supply challenges across the industry are also being exacerbated by increasing construction and financing costs, and a range of planning and approvals issues. All these factors have driven up rent for prime industrial property in western Sydney by 48% in the past year.

Against this backdrop, we are in the strong position of having approved and development-ready land, to meet the strong demand. Rental income is expected to grow significantly over the coming years, on the back of continued development of new facilities (at Oakdale West and Oakdale East Stage 2) and the mark-to-market impact as existing leases are renewed.

Both of its key assets seem on course to continue to increase cash flow to Brickworks.

What is the dividend yield?

Using the full-year payout of 65 cents per share, Brickworks currently has a grossed-up dividend yield of 3.9%. However, if there is a dividend increase in FY24, this yield will likely be higher.

Why did the Brickworks share price fall?

As reported by my colleague James Mickleboro, underlying net profit after tax was down 32% to $508 million with both the US and Australian building products divisions suffering from higher costs including energy and wages.

The company is aiming to recoup some of its lost profitability by increasing prices, though it warned that the order book is softening and it's expecting more weakness ahead.

The Australian reported on commentary from the broker Citi that there may be lower property development profits in FY24 because of the timing of completions, and noted that Brickworks warned of lower demand as it clears the backlog of orders.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Tristan Harrison has positions in Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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