BMTC Group (TSE:GBT) Will Pay A Dividend Of CA$0.18

The board of BMTC Group Inc. (TSE:GBT) has announced that it will pay a dividend of CA$0.18 per share on the 28th of June. This payment means that the dividend yield will be 2.8%, which is around the industry average.

View our latest analysis for BMTC Group

BMTC Group Is Paying Out More Than It Is Earning

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before this announcement, BMTC Group was paying out 109% of what it was earning, and not generating any free cash flows either. This high of a dividend payment could start to put pressure on the balance sheet in the future.

If the company can't turn things around, EPS could fall by 20.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 142%, which could put the dividend in jeopardy if the company's earnings don't improve.

BMTC Group Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of CA$0.24 in 2014 to the most recent total annual payment of CA$0.36. This works out to be a compound annual growth rate (CAGR) of approximately 4.1% a year over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend Has Limited Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. BMTC Group's earnings per share has shrunk at 21% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

BMTC Group's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for BMTC Group (of which 1 is potentially serious!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.