Interested In Bel Fuse's (NASDAQ:BELF.A) Upcoming US$0.06 Dividend? You Have Four Days Left
Readers hoping to buy Bel Fuse Inc. (NASDAQ:BELF.A) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Investors can purchase shares before the 14th of April in order to be eligible for this dividend, which will be paid on the 30th of April.
Bel Fuse's next dividend payment will be US$0.06 per share, and in the last 12 months, the company paid a total of US$0.28 per share. Based on the last year's worth of payments, Bel Fuse has a trailing yield of 1.7% on the current stock price of $16.7138. 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! As a result, readers should always check whether Bel Fuse has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Bel Fuse
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. That's why it's good to see Bel Fuse paying out a modest 27% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. What's good is that dividends were well covered by free cash flow, with the company paying out 8.3% of its cash flow last year.
It's positive to see that Bel Fuse'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.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Readers will understand then, why we're concerned to see Bel Fuse's earnings per share have dropped 8.5% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Bel Fuse's dividend payments are effectively flat on where they were 10 years ago. When earnings are declining yet the dividends are flat, typically the company is either paying out a higher portion of its earnings, or paying out of cash or debt on the balance sheet, neither of which is ideal.
The Bottom Line
Should investors buy Bel Fuse for the upcoming dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. All things considered, we are not particularly enthused about Bel Fuse from a dividend perspective.
In light of that, while Bel Fuse has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 2 warning signs for Bel Fuse that we recommend you consider before investing in the business.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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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