Here's What We Like About Bisalloy Steel Group's (ASX:BIS) Upcoming Dividend

Bisalloy Steel Group Limited (ASX:BIS) stock is about to trade ex-dividend in four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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 Bisalloy Steel Group's shares before the 16th of November in order to be eligible for the dividend, which will be paid on the 30th of November.

The company's upcoming dividend is AU$0.10 a share, following on from the last 12 months, when the company distributed a total of AU$0.14 per share to shareholders. Looking at the last 12 months of distributions, Bisalloy Steel Group has a trailing yield of approximately 4.9% on its current stock price of A$2.75. If you buy this business for its dividend, you should have an idea of whether Bisalloy Steel Group's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Bisalloy Steel Group

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. Fortunately Bisalloy Steel Group's payout ratio is modest, at just 50% of profit. 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 paid out more than half (54%) of its free cash flow in the past year, which is within an average range for most companies.

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 how much of its profit Bisalloy Steel Group paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. 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's why it's comforting to see Bisalloy Steel Group's earnings have been skyrocketing, up 27% per annum for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Bisalloy Steel Group has delivered 13% dividend growth per year on average over the past 10 years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

To Sum It Up

Is Bisalloy Steel Group an attractive dividend stock, or better left on the shelf? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. Bisalloy Steel Group looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in Bisalloy Steel Group for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 3 warning signs for Bisalloy Steel Group you should know about.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are 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.