Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Belvoir Group PLC (LON:BLV) is about to go ex-dividend in just 4 days. Ex-dividend means that investors that purchase the stock on or after the 17th of September will not receive this dividend, which will be paid on the 30th of October.
Belvoir Group's upcoming dividend is UK£0.054 a share, following on from the last 12 months, when the company distributed a total of UK£0.068 per share to shareholders. Looking at the last 12 months of distributions, Belvoir Group has a trailing yield of approximately 4.5% on its current stock price of £1.52. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Belvoir Group can afford its dividend, and if the dividend could grow.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Belvoir Group is paying out just 24% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 18% of its cash flow last year.
It's positive to see that Belvoir Group's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Belvoir Group has grown its earnings rapidly, up 21% a year for the past five years. Belvoir Group looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Belvoir Group has delivered an average of 2.0% per year annual increase in its dividend, based on the past eight years of dividend payments. Earnings per share have been growing much quicker than dividends, potentially because Belvoir Group is keeping back more of its profits to grow the business.
The Bottom Line
Has Belvoir Group got what it takes to maintain its dividend payments? Belvoir Group has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past eight years, but the conservative payout ratio makes the current dividend look sustainable. It's a promising combination that should mark this company worthy of closer attention.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To help with this, we've discovered 3 warning signs for Belvoir Group that you should be aware of before investing in their shares.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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