Yahoo Finance Here's What We Like About Bel Fuse's (NASDAQ:BELF.A) Upcoming Dividend
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Bel Fuse Inc. (NASDAQ:BELF.A) is about to go ex-dividend in just four days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. In other words, investors can purchase Bel Fuse's shares before the 14th of October in order to be eligible for the dividend, which will be paid on the 1st of November.
The company's next dividend payment will be US$0.06 per share, and in the last 12 months, the company paid a total of US$0.24 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 $14.5. 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 investigate whether Bel Fuse can afford its dividend, and if the dividend could grow.
View our latest analysis for Bel Fuse
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Bel Fuse paid out just 16% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The good news is it paid out just 15% of its free cash flow in the last year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That explains why we're not overly excited about Bel Fuse's flat earnings over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share. Growth has been anaemic. Yet with more than 75% of its earnings being kept in the business, there is ample room to reinvest in growth or lift the payout ratio - either of which could increase the dividend.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Bel Fuse's dividend payments per share have declined at 1.5% per year on average over the past 10 years, which is uninspiring.
The Bottom Line
Has Bel Fuse got what it takes to maintain its dividend payments? The company has barely grown earnings per share over this time, but at least it's paying out a decently low percentage of its earnings and cashflow as dividends. This could suggest management is reinvesting in future growth opportunities. Generally we like to see both low payout ratios and strong earnings per share growth, but Bel Fuse is halfway there. It's a promising combination that should mark this company worthy of closer attention.
On that note, you'll want to research what risks Bel Fuse is facing. For example, Bel Fuse has 3 warning signs (and 1 which is potentially serious) we think you should know about.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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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