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Dividend Investors: Don't Be Too Quick To Buy Bassett Furniture Industries, Incorporated (NASDAQ:BSET) For Its Upcoming Dividend

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Simply Wall St
·3 min read
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Bassett Furniture Industries, Incorporated (NASDAQ:BSET) stock is about to trade ex-dividend in four days. You can purchase shares before the 11th of February in order to receive the dividend, which the company will pay on the 26th of February.

Bassett Furniture Industries's upcoming dividend is US$0.13 a share, following on from the last 12 months, when the company distributed a total of US$0.50 per share to shareholders. Last year's total dividend payments show that Bassett Furniture Industries has a trailing yield of 2.2% on the current share price of $22.42. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Bassett Furniture Industries

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Bassett Furniture Industries reported a loss last year, so it's not great to see that it has continued paying a dividend. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If Bassett Furniture Industries didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. What's good is that dividends were well covered by free cash flow, with the company paying out 15% of its cash flow last year.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Bassett Furniture Industries was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Bassett Furniture Industries has increased its dividend at approximately 15% a year on average.

Get our latest analysis on Bassett Furniture Industries's balance sheet health here.

The Bottom Line

Should investors buy Bassett Furniture Industries for the upcoming dividend? It's hard to get used to Bassett Furniture Industries paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.

With that being said, if you're still considering Bassett Furniture Industries as an investment, you'll find it beneficial to know what risks this stock is facing. Case in point: We've spotted 2 warning signs for Bassett Furniture Industries you should be aware of.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.