BBMG Corporation (HKG:2009) is about to trade ex-dividend in the next 4 days. You will need to purchase shares before the 26th of May to receive the dividend, which will be paid on the 17th of July.
BBMG's next dividend payment will be HK$0.12 per share, and in the last 12 months, the company paid a total of HK$0.12 per share. Based on the last year's worth of payments, BBMG stock has a trailing yield of around 7.3% on the current share price of HK$1.8. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether BBMG has been able to grow its dividends, or if the dividend might be cut.
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. That's why it's good to see BBMG paying out a modest 40% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Over the last year, it paid out dividends equivalent to 293% of what it generated in free cash flow, a disturbingly high percentage. Our definition of free cash flow excludes cash generated from asset sales, so since BBMG is paying out such a high percentage of its cash flow, it might be worth seeing if it sold assets or had similar events that might have led to such a high dividend payment.
BBMG paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to BBMG's ability to maintain its dividend.
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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at BBMG, with earnings per share up 2.7% on average over the last five years. Earnings have been growing somewhat, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. BBMG has delivered 13% dividend growth per year on average over the past ten years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
The Bottom Line
Should investors buy BBMG for the upcoming dividend? BBMG delivered reasonable earnings per share growth in recent times, and paid out less than half its profits and 293% of its cash flow over the last year, which is a mediocre outcome. All things considered, we are not particularly enthused about BBMG from a dividend perspective.
If you're not too concerned about BBMG's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. We've identified 3 warning signs with BBMG (at least 1 which is significant), and understanding them should be part of your investment process.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
Love or hate this article? Concerned about the content? Get in touch with us directly. Alternatively, email email@example.com.
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. Thank you for reading.