Bloomin' Brands' (NASDAQ:BLMN) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Bloomin' Brands, Inc. (NASDAQ:BLMN) has announced that it will be increasing its dividend by 71% on the 15th of March to $0.24, up from last year's comparable payment of $0.14. The payment will take the dividend yield to 2.0%, which is in line with the average for the industry.

Check out our latest analysis for Bloomin' Brands

Bloomin' Brands' Earnings Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, Bloomin' Brands' dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise exponentially over the next year. If the dividend extends its recent trend, estimates say the dividend could reach 18%, which we would be comfortable to see continuing.

Bloomin' Brands' Dividend Has Lacked Consistency

Bloomin' Brands has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. The annual payment during the last 8 years was $0.24 in 2015, and the most recent fiscal year payment was $0.56. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. 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.

Bloomin' Brands May Find It Hard To Grow The Dividend

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. Earnings have grown at around 2.0% a year for the past five years, which isn't massive but still better than seeing them shrink. The company has been growing at a pretty soft 2.0% per annum, and is paying out quite a lot of its earnings to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 4 warning signs for Bloomin' Brands (of which 1 is potentially serious!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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