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BKI Investment Company Limited's (ASX:BKI) investors are due to receive a payment of A$0.04 per share on 29th of August. This means that the annual payment will be 4.5% of the current stock price, which is in line with the average for the industry.
View our latest analysis for BKI Investment
BKI Investment Doesn't Earn Enough To Cover Its Payments
Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, the company was paying out 98% of what it was earning. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.
If the company can't turn things around, EPS could fall by 4.9% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 103%, which is definitely a bit high to be sustainable going forward.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of A$0.068 in 2014 to the most recent total annual payment of A$0.0785. This means that it has been growing its distributions at 1.4% per annum over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.
Dividend Growth May Be Hard To Achieve
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. In the last five years, BKI Investment's earnings per share has shrunk at approximately 4.9% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.
We're Not Big Fans Of BKI Investment's Dividend
Overall, while some might be pleased that the dividend wasn't cut, we think this may help BKI Investment make more consistent payments in the future. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Overall, this doesn't get us very excited from an income standpoint.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for BKI Investment that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.