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BKI Investment Company Limited's (ASX:BKI) investors are due to receive a payment of A$0.039 per share on 28th of February. This makes the dividend yield about the same as the industry average at 4.6%.
See our latest analysis for BKI Investment
BKI Investment's Future Dividends May Potentially Be At Risk
We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, the company was paying out 104% 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.
Earnings per share could rise by 0.8% 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 104%, 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. Since 2015, the dividend has gone from A$0.069 total annually to A$0.0785. This implies that the company grew its distributions at a yearly rate of about 1.3% over that duration. 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 evaluate if earnings per share is growing, which could point to a growing dividend in the future. Unfortunately, BKI Investment's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. The earnings growth is anaemic, and the company is paying out 104% of its profit. As they say in finance, 'past performance is not indicative of future performance', but we are not confident a company with limited earnings growth and a high payout ratio will be a star dividend-payer over the next decade.
The Dividend Could Prove To Be Unreliable
In summary, while it's always good to see the dividend being raised, we don't think BKI Investment's payments are rock solid. The payments are bit high to be considered sustainable, and the track record isn't the best. We don't think BKI Investment is a great stock to add to your portfolio if income is your focus.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for BKI Investment that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.