BigBen Interactive (EPA:BIG) Will Pay A Dividend Of €0.30

BigBen Interactive (EPA:BIG) has announced that it will pay a dividend of €0.30 per share on the 29th of July. This means the annual payment will be 2.0% of the current stock price, which is lower than the industry average.

View our latest analysis for BigBen Interactive

BigBen Interactive's Payment Has Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, BigBen Interactive's dividend was making up a very large proportion of earnings, and the company was also not generating any cash flow to offset this. Generally, we think that this would be a risky long term practice.

According to analysts, EPS should be several times higher next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 10% which is fairly sustainable.

BigBen Interactive's Dividend Has Lacked Consistency

BigBen Interactive has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2014, the annual payment back then was €0.15, compared to the most recent full-year payment of €0.30. This works out to be a compound annual growth rate (CAGR) of approximately 9.1% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. BigBen Interactive might have put its house in order since then, but we remain cautious.

BigBen Interactive May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Over the past five years, it looks as though BigBen Interactive's EPS has declined at around 3.5% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

BigBen Interactive's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The payments are bit high to be considered sustainable, and the track record isn't the best. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for BigBen Interactive that investors need to be conscious of moving forward. 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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