Should You Buy Big Lots, Inc. (NYSE:BIG) For Its Upcoming Dividend?

By
Simply Wall St
Published
March 13, 2021
NYSE:BIG

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Big Lots, Inc. (NYSE:BIG) is about to trade ex-dividend in the next four days. You can purchase shares before the 18th of March in order to receive the dividend, which the company will pay on the 2nd of April.

Big Lots's next dividend payment will be US$0.30 per share, and in the last 12 months, the company paid a total of US$1.20 per share. Based on the last year's worth of payments, Big Lots has a trailing yield of 1.7% on the current stock price of $68.67. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Big Lots has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Big Lots

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Big Lots has a low and conservative payout ratio of just 7.3% of its income after tax.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
NYSE:BIG Historic Dividend March 13th 2021

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Big Lots has grown its earnings rapidly, up 42% a year for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Big Lots looks like a promising growth company.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Big Lots has delivered 8.5% dividend growth per year on average over the past seven years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

From a dividend perspective, should investors buy or avoid Big Lots? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Big Lots ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To that end, you should learn about the 4 warning signs we've spotted with Big Lots (including 2 which can't be ignored).

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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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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