Barrett Business Services (NASDAQ:BBSI) Has Re-Affirmed Its Dividend Of US$0.30

Barrett Business Services, Inc. (NASDAQ:BBSI) has announced that it will pay a dividend of US$0.30 per share on the 1st of April. This makes the dividend yield 1.6%, which will augment investor returns quite nicely.

Check out our latest analysis for Barrett Business Services

Barrett Business Services' Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Barrett Business Services was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

The next year is set to see EPS grow by 6.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 24% by next year, which is in a pretty sustainable range.

Barrett Business Services Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from US$0.36 in 2012 to the most recent annual payment of US$1.20. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Barrett Business Services has grown earnings per share at 14% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Barrett Business Services' prospects of growing its dividend payments in the future.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 3 Barrett Business Services analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is Barrett Business Services not quite the opportunity you were looking for? Why not check out our selection of top 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.