BBGI Global Infrastructure (LON:BBGI) Is Paying Out A Larger Dividend Than Last Year

BBGI Global Infrastructure S.A. (LON:BBGI) has announced that it will be increasing its dividend from last year's comparable payment on the 5th of April to £0.0397. This will take the dividend yield to an attractive 6.0%, providing a nice boost to shareholder returns.

Check out our latest analysis for BBGI Global Infrastructure

BBGI Global Infrastructure Is Paying Out More Than It Is Earning

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last dividend made up quite a large portion of free cash flows, and this was made worse by the lack of free cash flows. This is a pretty unsustainable practice, and could be risky if continued for the long term.

EPS is set to fall by 14.4% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 180%, which is definitely a bit high to be sustainable going forward.

BBGI Global Infrastructure Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of £0.055 in 2014 to the most recent total annual payment of £0.0748. This works out to be a compound annual growth rate (CAGR) of approximately 3.1% 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

The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. Over the past five years, it looks as though BBGI Global Infrastructure's EPS has declined at around 14% a year. 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.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think BBGI Global Infrastructure's payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for BBGI Global Infrastructure that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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