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, Bel Fuse Inc (NASDAQ:BELF.B) has paid a dividend to shareholders. It currently yields 1.0%. Let’s dig deeper into whether Bel Fuse should have a place in your portfolio.
How I analyze a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is it the top 25% annual dividend yield payer?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has dividend per share amount increased over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Will it have the ability to keep paying its dividends going forward?
How well does Bel Fuse fit our criteria?
The current payout ratio for BELF.B is negative, meaning that the company is not yet profitable and is paying dividend by dipping into its retained earnings.
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. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. BELF.B investors will be well aware there has not been any increase in the dividend payments over the last 10 years, although the payments have at least been steady. Though this may not be a serious red flag, strong dividend stocks should always strive to increase its payout over time.
Compared to its peers, Bel Fuse generates a yield of 1.0%, which is on the low-side for Electronic stocks.
Now you know to keep in mind the reason why investors should be careful investing in Bel Fuse for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three pertinent aspects you should further examine:
- Valuation: What is BELF.B 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 BELF.B is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Bel Fuse’s board and the CEO’s back ground.
- 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 email@example.com.