BGSF's (NYSE:BGSF) Shareholders Will Receive A Bigger Dividend Than Last Year

BGSF, Inc. (NYSE:BGSF) has announced that it will be increasing its dividend on the 22nd of November to US$0.12. This makes the dividend yield 3.3%, which is above the industry average.

See our latest analysis for BGSF

BGSF's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, BGSF was paying a whopping 109% as a dividend, but this only made up 39% of its overall earnings. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Looking forward, earnings per share is forecast to rise by 11.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 37%, which is in the range that makes us comfortable with the sustainability of the dividend.

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. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2014, the first annual payment was US$0.60, compared to the most recent full-year payment of US$0.48. This works out to be a decline of approximately 3.1% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

We Could See BGSF's Dividend Growing

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. BGSF has impressed us by growing EPS at 6.2% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

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 BGSF is earning enough to cover the payments, the cash flows are lacking. We don't think BGSF is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for BGSF (1 is potentially serious!) that you should be aware of before investing. We have also put together a list of global stocks with a solid dividend.

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.

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