Bell Financial Group (ASX:BFG) Is Paying Out Less In Dividends Than Last Year

Bell Financial Group Limited's (ASX:BFG) dividend is being reduced from last year's payment covering the same period to A$0.025 on the 6th of September. This means the annual payment is 8.1% of the current stock price, which is above the average for the industry.

View our latest analysis for Bell Financial Group

Bell Financial Group Doesn't Earn Enough To Cover Its Payments

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Bell Financial Group's dividend made up quite a large proportion of earnings but only 18% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Over the next year, EPS could expand by 12.9% if the company continues along the path it has been on recently. If the dividend continues on its recent course, the payout ratio in 12 months could be 100%, which is a bit high and could start applying pressure to the balance sheet.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the dividend has gone from A$0.03 total annually to A$0.09. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. 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.

Bell Financial Group's Dividend Might Lack Growth

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Bell Financial Group has seen EPS rising for the last five years, at 13% per annum. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

Our Thoughts On Bell Financial Group's Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Bell Financial Group that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.