Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Historically, Bassett Furniture Industries, Incorporated (NASDAQ:BSET) has paid a dividend to shareholders. It currently yields 2.6%. Let’s dig deeper into whether Bassett Furniture Industries should have a place in your portfolio.
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How I analyze a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is its annual yield among the top 25% of dividend-paying companies?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has dividend per share amount increased over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Will the company be able to keep paying dividend based on the future earnings growth?
How well does Bassett Furniture Industries fit our criteria?
Bassett Furniture Industries has a trailing twelve-month payout ratio of 61%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 42% which, assuming the share price stays the same, leads to a dividend yield of 3.0%. However, EPS should increase to $0.98, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.
Relative to peers, Bassett Furniture Industries has a yield of 2.6%, which is high for Consumer Durables stocks but still below the market’s top dividend payers.
With this in mind, I definitely rank Bassett Furniture Industries as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. I’ve put together three important aspects you should look at:
- Future Outlook: What are well-informed industry analysts predicting for BSET’s future growth? Take a look at our free research report of analyst consensus for BSET’s outlook.
- Valuation: What is BSET worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether BSET is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.