Big Lots (NYSE:BIG) Has Re-Affirmed Its Dividend Of US$0.30

Big Lots, Inc.'s (NYSE:BIG) investors are due to receive a payment of US$0.30 per share on 25th of June. This makes the dividend yield 2.0%, which will augment investor returns quite nicely.

Check out our latest analysis for Big Lots

Big Lots' Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, Big Lots' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to fall by 60.8%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 19%, which is comfortable for the company to continue in the future.

Big Lots Doesn't Have A Long Payment History

Big Lots' dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The first annual payment during the last 7 years was US$0.68 in 2014, and the most recent fiscal year payment was US$1.20. This works out to be a compound annual growth rate (CAGR) of approximately 8.5% a year over that time. Investors will likely want to see a longer track record of growth before making decision to add this to their income portfolio.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see Big Lots has been growing its earnings per share at 43% a year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Big Lots Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Big Lots might even raise payments in the future. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. Just as an example, we've come across 3 warning signs for Big Lots you should be aware of, and 2 of them are concerning. 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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This article by Simply Wall St is general in nature. 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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