Important news for shareholders and potential investors in Bonmarché Holdings plc (LON:BON): The dividend payment of UK£0.025 per share will be distributed to shareholders on 21 January 2019, and the stock will begin trading ex-dividend at an earlier date, 06 December 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into Bonmarché Holdings’s latest financial data to analyse its dividend attributes.
See our latest analysis for Bonmarché Holdings
5 questions I ask before picking a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
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Is their annual yield among the top 25% of dividend payers?
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Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
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Has the amount of dividend per share grown over the past?
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Does earnings amply cover its dividend payments?
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Will it be able to continue to payout at the current rate in the future?
Does Bonmarché Holdings pass our checks?
The current trailing twelve-month payout ratio for the stock is 81%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 70%, leading to a dividend yield of around 9.5%. Furthermore, EPS is also forecasted to fall to £0.083 in the upcoming year. The lower EPS on top of a lower payout ratio will lead to a fall in dividend payment moving forward.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Unfortunately, it is really too early to view Bonmarché Holdings as a dividend investment. It has only been consistently paying dividends for 4 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, Bonmarché Holdings generates a yield of 9.5%, which is high for Specialty Retail stocks.
Next Steps:
With these dividend metrics in mind, I definitely rank Bonmarché Holdings as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three key factors you should look at: