There's A Lot To Like About Beacon Lighting Group's (ASX:BLX) Upcoming AU$0.042 Dividend

It looks like Beacon Lighting Group Limited (ASX:BLX) is about to go ex-dividend in the next four days. Investors can purchase shares before the 4th of March in order to be eligible for this dividend, which will be paid on the 12th of March.

Beacon Lighting Group's next dividend payment will be AU$0.042 per share, on the back of last year when the company paid a total of AU$0.066 to shareholders. Based on the last year's worth of payments, Beacon Lighting Group stock has a trailing yield of around 3.5% on the current share price of A$1.91. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Beacon Lighting Group has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Beacon Lighting Group

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Beacon Lighting Group's payout ratio is modest, at just 46% of profit. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. The good news is it paid out just 11% of its free cash flow in the last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Beacon Lighting Group paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see Beacon Lighting Group's earnings per share have risen 13% per annum over the last five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, seven years ago, Beacon Lighting Group has lifted its dividend by approximately 25% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

Is Beacon Lighting Group an attractive dividend stock, or better left on the shelf? Beacon Lighting Group has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past seven years, but the conservative payout ratio makes the current dividend look sustainable. Overall we think this is an attractive combination and worthy of further research.

While it's tempting to invest in Beacon Lighting Group for the dividends alone, you should always be mindful of the risks involved. We've identified 3 warning signs with Beacon Lighting Group (at least 1 which is a bit unpleasant), and understanding them should be part of your investment process.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.