Yahoo Finance It Might Not Be A Great Idea To Buy BK Technologies Corporation (NYSEMKT:BKTI) For Its Next Dividend
BK Technologies Corporation (NYSEMKT:BKTI) is about to trade ex-dividend in the next four days. This means that investors who purchase shares on or after the 31st of December will not receive the dividend, which will be paid on the 19th of January.
BK Technologies's next dividend payment will be US$0.02 per share, on the back of last year when the company paid a total of US$0.08 to shareholders. Last year's total dividend payments show that BK Technologies has a trailing yield of 2.6% on the current share price of $3.05. 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 BK Technologies
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. BK Technologies 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 cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable.
Click here to see how much of its profit BK Technologies paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. BK Technologies reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. BK Technologies's dividend payments per share have declined at 26% per year on average over the past five years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.
Remember, you can always get a snapshot of BK Technologies's financial health, by checking our visualisation of its financial health, here.
Final Takeaway
Should investors buy BK Technologies for the upcoming dividend? It's hard to get used to BK Technologies paying a dividend despite reporting a loss over the past year. Worse, the dividend was not well covered by cash flow. Bottom line: BK Technologies has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.
So if you're still interested in BK Technologies despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. For instance, we've identified 3 warning signs for BK Technologies (1 is significant) you should be aware of.
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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