Stock Analysis

Black Diamond Group (TSE:BDI) Is Paying Out A Larger Dividend Than Last Year

TSX:BDI
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Black Diamond Group Limited (TSE:BDI) will increase its dividend from last year's comparable payment on the 15th of January to CA$0.02. This will take the dividend yield to an attractive 1.7%, providing a nice boost to shareholder returns.

Our analysis indicates that BDI is potentially undervalued!

Black Diamond Group's Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Black Diamond Group was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 8.3%. If the dividend continues on this path, the payout ratio could be 8.7% by next year, which we think can be pretty sustainable going forward.

historic-dividend
TSX:BDI Historic Dividend November 24th 2022

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the annual payment back then was CA$0.66, compared to the most recent full-year payment of CA$0.08. Dividend payments have fallen sharply, down 88% over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Looks Likely To Grow

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. We are encouraged to see that Black Diamond Group has grown earnings per share at 80% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like Black Diamond Group's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for Black Diamond Group that investors should know about before committing capital to this stock. Is Black Diamond Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Valuation is complex, but we're helping make it simple.

Find out whether Black Diamond Group is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.