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 Bloomin’ Brands, Inc. (NASDAQ:BLMN) is about to go ex-dividend in just 4 days. Ex-dividend means that investors that purchase the stock on or after the 9th of August will not receive this dividend, which will be paid on the 21st of August.
Bloomin’ Brands’s next dividend payment will be US$0.10 per share, on the back of last year when the company paid a total of US$0.40 to shareholders. Looking at the last 12 months of distributions, Bloomin’ Brands has a trailing yield of approximately 2.3% on its current stock price of $17.22. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Bloomin’ Brands has been able to grow its dividends, or if the dividend might be cut.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Bloomin’ Brands paid out a comfortable 32% of its profit last year. 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. It distributed 29% of its free cash flow as dividends, a comfortable payout level for most companies.
It’s positive to see that Bloomin’ Brands’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.
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. Bloomin’ Brands’s earnings per share have fallen at approximately 6.9% a year over the previous 5 years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. In the past 4 years, Bloomin’ Brands has increased its dividend at approximately 14% a year on average.
The Bottom Line
Is Bloomin’ Brands an attractive dividend stock, or better left on the shelf? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It’s definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. To summarise, Bloomin’ Brands looks okay on this analysis, although it doesn’t appear a stand-out opportunity.
Curious what other investors think of Bloomin’ Brands? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow .
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.
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If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.