Readers hoping to buy Bassett Furniture Industries, Incorporated (NASDAQ:BSET) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. If you purchase the stock on or after the 12th of November, you won’t be eligible to receive this dividend, when it is paid on the 27th of November.
Bassett Furniture Industries’s upcoming dividend is US$0.13 a share, following on from the last 12 months, when the company distributed a total of US$0.32 per share to shareholders. Last year’s total dividend payments show that Bassett Furniture Industries has a trailing yield of 2.1% on the current share price of $15.17. If you buy this business for its dividend, you should have an idea of whether Bassett Furniture Industries’s dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Bassett Furniture Industries lost money last year, so the fact that it’s paying a dividend is certainly disconcerting. There might be a good reason for this, but we’d want to look into it further before getting comfortable. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If cash earnings don’t cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. What’s good is that dividends were well covered by free cash flow, with the company paying out 22% of its cash flow last year.
Click here to see how much of its profit Bassett Furniture Industries paid out over the last 12 months.
NasdaqGS:BSET Historic Dividend November 7th 2020
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. Bassett Furniture Industries was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. In the past nine years, Bassett Furniture Industries has increased its dividend at approximately 12% a year on average.
The Bottom Line
Is Bassett Furniture Industries worth buying for its dividend? First, it’s not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow.” With the way things are shaping up from a dividend perspective, we’d be inclined to steer clear of Bassett Furniture Industries.
With that being said, if you’re still considering Bassett Furniture Industries as an investment, you’ll find it beneficial to know what risks this stock is facing. In terms of investment risks, we’ve identified 2 warning signs with Bassett Furniture Industries and understanding them should be part of your investment process.
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.
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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