Beacon Lighting Group (ASX:BLX) Will Pay A Dividend Of A$0.041

The board of Beacon Lighting Group Limited (ASX:BLX) has announced that it will pay a dividend on the 21st of March, with investors receiving A$0.041 per share. Including this payment, the dividend yield on the stock will be 2.3%, which is a modest boost for shareholders' returns.

Check out our latest analysis for Beacon Lighting Group

Beacon Lighting Group's Payment Could Potentially Have Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Based on the last payment, Beacon Lighting Group was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 33.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 49%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was A$0.014 in 2015, and the most recent fiscal year payment was A$0.079. This works out to be a compound annual growth rate (CAGR) of approximately 19% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Beacon Lighting Group has impressed us by growing EPS at 11% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

Beacon Lighting Group Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Beacon Lighting Group might even raise payments in the future. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 7 Beacon Lighting Group analysts we track are forecasting continued growth with our free report on analyst estimates for the company. 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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