Stock Analysis

Black Diamond Group (TSE:BDI) Is Due To Pay A Dividend Of CA$0.02

TSX:BDI
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Black Diamond Group Limited (TSE:BDI) will pay a dividend of CA$0.02 on the 15th of July. Based on this payment, the dividend yield on the company's stock will be 1.2%, which is an attractive boost to shareholder returns.

See our latest analysis for Black Diamond Group

Black Diamond Group's Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, prior to this announcement, Black Diamond Group's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 2.2% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 12%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

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TSX:BDI Historic Dividend May 11th 2023

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the annual payment back then was CA$0.72, compared to the most recent full-year payment of CA$0.08. Dividend payments have fallen sharply, down 89% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. We are encouraged to see that Black Diamond Group has grown earnings per share at 85% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like Black Diamond Group's Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. 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. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 3 warning signs for Black Diamond Group that investors need to be conscious of moving forward. Is Black Diamond 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.