This high-yield ASX 200 dividend share is swimming in cash

There are plenty of high-yielding ASX dividend shares on the S&P/ASX 200 Index (ASX: XJO). From the big banks like Commonwealth Bank of Australia (ASX: CBA) to companies like BHP Group Ltd (ASX: BHP) and Telstra Corporation Ltd (ASX: TLS), there is no shortage of shares that currently have a fat yield in front of their name right now. 

But the companies that could be described as ‘swimming in bash’ are far fewer. The shares named above have high yields because they pay out the vast majority of their earnings as dividends, leaving a small amount of cash to reinvest into their businesses. For example, CBA has a payout ratio target of between 70-80% of earnings.       

Not that this is a bad thing. Many of those companies are large, mature businesses that have reached the upper limits of their growth potential. Thus, it makes sense for them to give shareholders most of their profits. 

But what if a company has a decent dividend yield with a lower payout ratio? That means it still offers yield today, but with the potential of far higher yields down the track thanks to a higher level of reinvestment. Brickworks Limited (ASX: BKW) could be an ASX 200 share that does just that. 

Could ASX dividend share Brickworks be swimming in cash?

Brickworks is an ASX stalwart, having been around since 1934. It is primarily in the construction materials business, making bricks (gasp) and other building supplies. But it also has some other ventures, such as a real estate portfolio, and a large investment in Washington H. Soul Pattinson and Co Ltd (ASX: SOL).

On today’s pricing, Brickworks offers a healthy dividend yield of 2.76%, which grosses-up to 3.94% with the company’s typical full franking credits. 

Looking at Brickworks’ last earnings report (it’s full-year earnings delivered last September), and we can see that the company made an underlying earnings per share (EPS) of $1.89 over FY2021. And yet the company paid out a total of 61 cents per share in dividends. That represents a payout ratio of just under 32.3%. 

That means that Brickworks is effectively keeping almost 68% of its earnings inside the business, available for debt financing, reinvestment or whatever else the company sees fit to use the cash for.

So compared to a business like CBA, we could indeed say that Brickworks is ‘swimming in cash’. All while funding a decent dividend right now.

At the current Brickworks share price, this ASX 200 dividend share has a market capitalisation of $3.35 billion. 

The post This high-yield ASX 200 dividend share is swimming in cash appeared first on The Motley Fool Australia.

More reading

• 3 quality ASX dividend shares that have been sold off
• Top ASX dividend shares to buy in March
• WAM boss urges cashed-up ASX 200 companies to buy, invest or pay dividends
• 3 reasons why Soul Pattinson (ASX:SOL) is a strong ASX dividend share idea
• Here’s why the Brickworks (ASX:BKW) share price has loads of growth potential: expert

Motley Fool contributor Sebastian Bowen owns Telstra Corporation Limited and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns and has recommended Brickworks, Telstra Corporation Limited, 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 Bruce Jackson.

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