UK markets open in 5 hours 28 minutes
  • NIKKEI 225

    27,473.85
    -132.61 (-0.48%)
     
  • HANG SENG

    21,353.55
    +70.03 (+0.33%)
     
  • CRUDE OIL

    78.56
    +0.09 (+0.11%)
     
  • GOLD FUTURES

    1,875.30
    -2.10 (-0.11%)
     
  • DOW

    33,949.01
    -207.68 (-0.61%)
     
  • BTC-GBP

    18,977.45
    -410.66 (-2.12%)
     
  • CMC Crypto 200

    528.06
    -8.83 (-1.65%)
     
  • ^IXIC

    11,910.52
    -203.27 (-1.68%)
     
  • ^FTAS

    4,322.83
    +12.96 (+0.30%)
     

Big 5 Sporting Goods' (NASDAQ:BGFV) Dividend Will Be $0.25

Big 5 Sporting Goods Corporation (NASDAQ:BGFV) will pay a dividend of $0.25 on the 15th of December. The dividend yield will be 7.7% based on this payment which is still above the industry average.

View our latest analysis for Big 5 Sporting Goods

Big 5 Sporting Goods' Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Big 5 Sporting Goods' earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

If the trend of the last few years continues, EPS will grow by 15.1% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 45% by next year, which is in a pretty sustainable range.

historic-dividend
historic-dividend

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of $0.30 in 2012 to the most recent total annual payment of $1.00. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that Big 5 Sporting Goods has grown earnings per share at 15% per year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 3 warning signs for Big 5 Sporting Goods you should be aware of, and 1 of them is a bit concerning. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here