Yahoo Finance Read This Before Considering Best & Less Group Holdings Ltd (ASX:BST) For Its Upcoming AU$0.08 Dividend
Readers hoping to buy Best & Less Group Holdings Ltd (ASX:BST) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase Best & Less Group Holdings' shares before the 13th of April in order to be eligible for the dividend, which will be paid on the 28th of April.
The company's next dividend payment will be AU$0.08 per share, and in the last 12 months, the company paid a total of AU$0.20 per share. Based on the last year's worth of payments, Best & Less Group Holdings has a trailing yield of 9.5% on the current stock price of A$2.1. 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! We need to see whether the dividend is covered by earnings and if it's growing.
Check out our latest analysis for Best & Less Group Holdings
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. It paid out 82% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. It could become a concern if earnings started to decline. A useful secondary check can be to evaluate whether Best & Less Group Holdings generated enough free cash flow to afford its dividend. Fortunately, it paid out only 38% of its free cash flow in the past year.
It's positive to see that Best & Less Group Holdings'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?
Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. Readers will understand then, why we're concerned to see Best & Less Group Holdings's earnings per share have dropped 11% a year over the past three years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Given that Best & Less Group Holdings has only been paying a dividend for a year, there's not much of a past history to draw insight from.
To Sum It Up
Is Best & Less Group Holdings worth buying for its dividend? The payout ratios are within a reasonable range, implying the dividend may be sustainable. Declining earnings are a serious concern, however, and could pose a threat to the dividend in future. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.
If you're not too concerned about Best & Less Group Holdings's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. Every company has risks, and we've spotted 1 warning sign for Best & Less Group Holdings you should know about.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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