BKI Investment (ASX:BKI) Is Paying Out A Dividend Of A$0.04

BKI Investment Company Limited's (ASX:BKI) investors are due to receive a payment of A$0.04 per share on 29th of August. This payment means that the dividend yield will be 4.5%, which is around the industry average.

See our latest analysis for BKI Investment

BKI Investment Doesn't Earn Enough To Cover Its Payments

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, the company's dividend was much higher than its earnings. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Looking forward, EPS could fall by 4.9% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could reach 103%, which could put the dividend in jeopardy if the company's earnings don't improve.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the annual payment back then was A$0.068, compared to the most recent full-year payment of A$0.0785. This means that it has been growing its distributions at 1.4% per annum over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

BKI Investment May Find It Hard To Grow The Dividend

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. In the last five years, BKI Investment's earnings per share has shrunk at approximately 4.9% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

BKI Investment's Dividend Doesn't Look Great

Overall, while some might be pleased that the dividend wasn't cut, we think this may help BKI Investment make more consistent payments in the future. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. The dividend doesn't inspire confidence that it will provide solid income in the future.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for BKI Investment that investors need to be conscious of moving forward. Is BKI Investment not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.

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