B&C Speakers (BIT:BEC) Has Announced That It Will Be Increasing Its Dividend To €0.32

The board of B&C Speakers S.p.A. (BIT:BEC) has announced that it will be increasing its dividend by 23% on the 4th of May to €0.32. Based on the announced payment, the dividend yield for the company will be 2.5%, which is fairly typical for the industry.

View our latest analysis for B&C Speakers

B&C Speakers Is Paying Out More Than It Is Earning

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, B&C Speakers' dividend made up quite a large proportion of earnings but only 39% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Looking forward, EPS could fall by 8.7% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 104%, which could put the dividend under pressure if earnings don't start to improve.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the first annual payment was €0.16, compared to the most recent full-year payment of €0.26. This works out to be a compound annual growth rate (CAGR) of approximately 5.0% a year over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Dividend Growth May Be Hard To Come By

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. B&C Speakers has seen earnings per share falling at 8.7% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

Our Thoughts On B&C Speakers' Dividend

In summary, while it's always good to see the dividend being raised, we don't think B&C Speakers' payments are rock solid. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for B&C Speakers (of which 1 is a bit unpleasant!) 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.