BGSF (NYSE:BGSF) Has Announced That It Will Be Increasing Its Dividend To US$0.15

BGSF, Inc. (NYSE:BGSF) has announced that it will be increasing its dividend on the 22nd of February to US$0.15. This takes the dividend yield to 3.3%, which shareholders will be pleased with.

View our latest analysis for BGSF

BGSF's Earnings Easily Cover the Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last payment was quite easily covered by earnings, but it made up 137% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Looking forward, earnings per share is forecast to rise by 14.5% over the next year. If the dividend continues on this path, the payout ratio could be 38% by next year, which we think can be pretty sustainable going forward.

BGSF's Dividend Has Lacked Consistency

It's comforting to see that BGSF has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. There hasn't been much of a change in the dividend over the last 7. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

We Could See BGSF's Dividend Growing

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. BGSF has impressed us by growing EPS at 6.2% per year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

Our Thoughts On BGSF's Dividend

In summary, while it's always good to see the dividend being raised, we don't think BGSF's payments are rock solid. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We don't think BGSF is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, BGSF has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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