Beacon Lighting Group's (ASX:BLX) Dividend Will Be Increased To AU$0.046

By
Simply Wall St
Published
August 21, 2021
ASX:BLX
Source: Shutterstock

The board of Beacon Lighting Group Limited (ASX:BLX) has announced that it will be increasing its dividend on the 21st of September to AU$0.046. This takes the annual payment to 4.4% of the current stock price, which is about average for the industry.

See our latest analysis for Beacon Lighting Group

Beacon Lighting Group's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. The last dividend was quite easily covered by Beacon Lighting Group's earnings. 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 fall by 27.0%. If recent patterns in the dividend continue, we could see the payout ratio reaching 77% in the next 12 months, which is on the higher end of the range we would say is sustainable.

historic-dividend
ASX:BLX Historic Dividend August 21st 2021

Beacon Lighting Group's Dividend Has Lacked Consistency

Looking back, Beacon Lighting Group's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. Since 2014, the dividend has gone from AU$0.014 to AU$0.088. This works out to be a compound annual growth rate (CAGR) of approximately 30% a year 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

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Beacon Lighting Group has grown earnings per share at 15% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Beacon Lighting Group Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. To that end, Beacon Lighting Group has 2 warning signs (and 1 which is significant) we think you should know about. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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