Boise Cascade (NYSE:BCC) Is Increasing Its Dividend To $5.21

Boise Cascade Company (NYSE:BCC) has announced that it will be increasing its dividend from last year's comparable payment on the 16th of September to $5.21. This makes the dividend yield 6.8%, which is above the industry average.

View our latest analysis for Boise Cascade

Boise Cascade Is Paying Out More Than It Is Earning

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, based ont he last payment, Boise Cascade was earning enough to cover the dividend pretty comfortably. However, with more than 75% of free cash flow being paid out to shareholders, future growth could potentially be constrained.

EPS is set to fall by 11.9% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 117%, which could put the dividend under pressure if earnings don't start to improve.

Boise Cascade's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This suggests that the dividend might not be the most reliable. The annual payment during the last 7 years was $0.28 in 2017, and the most recent fiscal year payment was $8.80. This implies that the company grew its distributions at a yearly rate of about 64% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Boise Cascade has seen EPS rising for the last five years, at 37% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Our Thoughts On Boise Cascade's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Boise Cascade's payments are rock solid. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Boise Cascade has been making. We don't think Boise Cascade is a great stock to add to your portfolio if income is your focus.

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. For example, we've identified 3 warning signs for Boise Cascade (1 shouldn't be ignored!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com