Beacon Lighting Group Limited (ASX:BLX) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Readers hoping to buy Beacon Lighting Group Limited (ASX:BLX) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. This means that investors who purchase shares on or after the 4th of March will not receive the dividend, which will be paid on the 12th of March.

Beacon Lighting Group's upcoming dividend is AU$0.042 a share, following on from the last 12 months, when the company distributed a total of AU$0.066 per share to shareholders. Last year's total dividend payments show that Beacon Lighting Group has a trailing yield of 3.5% on the current share price of A$1.91. If you buy this business for its dividend, you should have an idea of whether Beacon Lighting Group's dividend is reliable and sustainable. As a result, readers should always check whether Beacon Lighting Group has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Beacon Lighting Group

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Beacon Lighting Group paid out a comfortable 46% of its profit last year. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. The good news is it paid out just 11% of its free cash flow in the last year.

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 Beacon Lighting 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 fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Beacon Lighting Group's earnings per share have risen 13% per annum over the last five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Beacon Lighting Group has delivered 25% dividend growth per year on average over the past seven years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

Is Beacon Lighting Group an attractive dividend stock, or better left on the shelf? It's great that Beacon Lighting Group is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. There's a lot to like about Beacon Lighting Group, and we would prioritise taking a closer look at it.

While it's tempting to invest in Beacon Lighting Group for the dividends alone, you should always be mindful of the risks involved. For example, Beacon Lighting Group has 3 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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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