Bowler Metcalf's (JSE:BCF) Dividend Will Be R0.19

The board of Bowler Metcalf Limited (JSE:BCF) has announced that it will pay a dividend on the 28th of March, with investors receiving R0.19 per share. This makes the dividend yield 12%, which will augment investor returns quite nicely.

See our latest analysis for Bowler Metcalf

Bowler Metcalf Doesn't Earn Enough To Cover Its Payments

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Bowler Metcalf's earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Earnings per share could rise by 8.5% over the next year if things go the same way as they have for the last few years. If the dividend continues on its recent course, the payout ratio in 12 months could be 109%, which is a bit high and could start applying pressure to the balance sheet.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from R0.31 in 2012 to the most recent annual payment of R0.51. This means that it has been growing its distributions at 5.1% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

Bowler Metcalf Could Grow Its Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see Bowler Metcalf has been growing its earnings per share at 8.5% a 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 Bowler Metcalf's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While Bowler Metcalf is earning enough to cover the payments, the cash flows are lacking. We don't think Bowler Metcalf is a great stock to add to your portfolio if income is your focus.

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. To that end, Bowler Metcalf has 3 warning signs (and 1 which is potentially serious) we think you should know about. We have also put together a list of global stocks with a solid dividend.

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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.