Beacon Lighting Group's (ASX:BLX) Dividend Is Being Reduced To A$0.038

Beacon Lighting Group Limited (ASX:BLX) has announced it will be reducing its dividend payable on the 20th of September to A$0.038, which is 5.0% lower than what investors received last year for the same period. This means that the dividend yield is 3.1%, which is a bit low when comparing to other companies in the industry.

Check out our latest analysis for Beacon Lighting Group

Beacon Lighting Group's Dividend Is Well Covered By Earnings

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 quite a large proportion of earnings is being invested back into the business.

The next year is set to see EPS grow by 27.0%. If the dividend continues on this path, the payout ratio could be 50% by next year, which we think can be pretty sustainable going forward.

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$0.014, compared to the most recent full-year payment of A$0.083. This works out to be a compound annual growth rate (CAGR) of approximately 19% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Beacon Lighting Group has seen EPS rising for the last five years, at 12% per annum. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

We Really Like Beacon Lighting Group's Dividend

It is generally not great to see the dividend being cut, but we don't think this should happen much if at all in the future given that Beacon Lighting Group has the makings of a solid income stock moving forward. Reducing the amount it is paying as a dividend can protect the company's balance sheet, keeping the dividend sustainable for longer. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Beacon Lighting Group that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of 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.