Yahoo Finance Baby Bunting Group (ASX:BBN) Is Reducing Its Dividend To A$0.018
Baby Bunting Group Limited (ASX:BBN) has announced that on 19th of March, it will be paying a dividend ofA$0.018, which a reduction from last year's comparable dividend. Despite the cut, the dividend yield of 4.6% will still be comparable to other companies in the industry.
See our latest analysis for Baby Bunting Group
Baby Bunting Group's Payment Has Solid Earnings Coverage
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Baby Bunting Group's dividend made up quite a large proportion of earnings but only 18% of free cash flows. This leaves plenty of cash for reinvestment into the business.
The next year is set to see EPS grow by 130.5%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 42% which brings it into quite a comfortable range.
Baby Bunting Group's Dividend Has Lacked Consistency
Baby Bunting Group has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. The annual payment during the last 8 years was A$0.063 in 2016, and the most recent fiscal year payment was A$0.075. This means that it has been growing its distributions at 2.2% per annum over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.
Baby Bunting Group May Find It Hard To Grow The Dividend
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. However, Baby Bunting Group's EPS was effectively flat over the past five years, which could stop the company from paying more every year.
Our Thoughts On Baby Bunting Group's Dividend
In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would probably look elsewhere for an income investment.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Baby Bunting Group that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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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.
