Four Days Left To Buy Bel Fuse Inc. (NASDAQ:BELF.A) Before The Ex-Dividend Date
Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see Bel Fuse Inc. (NASDAQ:BELF.A) is about to trade ex-dividend in the next four days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase Bel Fuse’s shares on or after the 13th of January, you won’t be eligible to receive the dividend, when it is paid on the 1st of February.
The company’s next dividend payment will be US$0.06 per share, and in the last 12 months, the company paid a total of US$0.24 per share. Based on the last year’s worth of payments, Bel Fuse has a trailing yield of 1.6% on the current stock price of $15.28. If you buy this business for its dividend, you should have an idea of whether Bel Fuse’s dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it’s growing.
See our latest analysis for Bel Fuse
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. Bel Fuse has a low and conservative payout ratio of just 17% of its income after tax. 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 more than three-quarters (75%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.
It’s positive to see that Bel Fuse’s dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It’s not encouraging to see that Bel Fuse’s earnings are effectively flat over the past five years. We’d take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share. A high payout ratio of 17% generally happens when a company can’t find better uses for the cash. Combined with slim earnings growth in the past few years, Bel Fuse could be signalling that its future growth prospects are thin.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Bel Fuse has seen its dividend decline 1.5% per annum on average over the past 10 years, which is not great to see.
The Bottom Line
Should investors buy Bel Fuse for the upcoming dividend? Bel Fuse has struggled to grow earnings per share, and it’s paying out less than half of its earnings and more than half its cash flow to shareholders as dividends. In summary, while it has some positive characteristics, we’re not inclined to race out and buy Bel Fuse today.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Every company has risks, and we’ve spotted 2 warning signs for Bel Fuse (of which 1 is a bit concerning!) you should know about.
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.
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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.