What Should You Know Before Buying Bonmarché Holdings plc (LON:BON) For Its Dividend
Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Over the past 4 years, Bonmarché Holdings plc (LSE:BON) has returned an average of 5.00% per year to shareholders in terms of dividend yield. Should it have a place in your portfolio? Let’s take a look at Bonmarché Holdings in more detail. View our latest analysis for Bonmarché Holdings
5 questions to ask before buying a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
Is their annual yield among the top 25% of dividend payers?
Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
Has it increased its dividend per share amount over the past?
Is it able to pay the current rate of dividends from its earnings?
Will it be able to continue to payout at the current rate in the future?
Does Bonmarché Holdings pass our checks?
Bonmarché Holdings has a trailing twelve-month payout ratio of 55.50%, which means that the dividend is covered by earnings. However, going forward, analysts expect BON’s payout to fall to 46.72% of its earnings, which leads to a dividend yield of around 7.41%. However, EPS should increase to £0.14, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Unfortunately, it is really too early to view Bonmarché Holdings as a dividend investment. It has only been consistently paying dividends for 4 years, however, standard practice for reliable payers is to look for a 10-year minimum track record. Compared to its peers, Bonmarché Holdings has a yield of 7.14%, which is high for Specialty Retail stocks.
Next Steps:
Taking into account the dividend metrics, Bonmarché Holdings ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. 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 relevant aspects you should look at:
1. Future Outlook: What are well-informed industry analysts predicting for BON’s future growth? Take a look at our free research report of analyst consensus for BON’s outlook.
2. Valuation: What is BON 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 BON is currently mispriced by the market.
3. 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 pass 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.