Bloomsbury Publishing Plc (LON:BMY) Pays A UK£0.037 Dividend In Just Three Days

Bloomsbury Publishing Plc (LON:BMY) is about to trade ex-dividend in the next three days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. In other words, investors can purchase Bloomsbury Publishing's shares before the 2nd of November in order to be eligible for the dividend, which will be paid on the 1st of December.

The company's next dividend payment will be UK£0.037 per share. Last year, in total, the company distributed UK£0.12 to shareholders. Calculating the last year's worth of payments shows that Bloomsbury Publishing has a trailing yield of 3.0% on the current share price of £3.9. If you buy this business for its dividend, you should have an idea of whether Bloomsbury Publishing's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Bloomsbury Publishing

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Bloomsbury Publishing paid out 53% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Bloomsbury Publishing generated enough free cash flow to afford its dividend. Over the last year it paid out 57% of its free cash flow as dividends, within the usual range for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Bloomsbury Publishing's earnings per share have been growing at 17% a year for the past five years. Bloomsbury Publishing is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. This is a reasonable combination that could hint at some further dividend increases in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Bloomsbury Publishing has lifted its dividend by approximately 8.2% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

From a dividend perspective, should investors buy or avoid Bloomsbury Publishing? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. That's why we're glad to see Bloomsbury Publishing's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 53% and 57% respectively. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Bloomsbury Publishing's dividend merits.

In light of that, while Bloomsbury Publishing has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 2 warning signs for Bloomsbury Publishing that we recommend you consider before investing in the business.

A common investing mistake is buying the first interesting stock you see. Here you can find a full 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.