Beacon Lighting Group (ASX:BLX) Is Paying Out A Larger Dividend Than Last Year

Beacon Lighting Group Limited's (ASX:BLX) periodic dividend will be increasing on the 20th of September to A$0.05, with investors receiving 8.7% more than last year's A$0.046. Despite this raise, the dividend yield of 3.9% is only a modest boost to shareholder returns.

View our latest analysis for Beacon Lighting Group

Beacon Lighting Group's Dividend Is Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Based on the last payment, Beacon Lighting Group was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to fall by 8.4% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 62%, which is comfortable for the company to continue in the future.

Beacon Lighting Group's Dividend Has Lacked Consistency

Beacon Lighting Group has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 8 years was A$0.014 in 2014, and the most recent fiscal year payment was A$0.093. This means that it has been growing its distributions at 27% per annum over that time. 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.

The Dividend Looks Likely To Grow

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. Beacon Lighting Group has seen EPS rising for the last five years, at 19% per annum. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

We Really Like Beacon Lighting Group's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for Beacon Lighting Group (of which 1 is a bit concerning!) you should know about. Is Beacon Lighting Group 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.