We Wouldn't Be Too Quick To Buy Bassett Furniture Industries, Incorporated (NASDAQ:BSET) Before It Goes Ex-Dividend
Readers hoping to buy Bassett Furniture Industries, Incorporated (NASDAQ:BSET) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. This means that investors who purchase shares on or after the 13th of May will not receive the dividend, which will be paid on the 28th of May.
Bassett Furniture Industries's next dividend payment will be US$0.13 per share, and in the last 12 months, the company paid a total of US$0.50 per share. Based on the last year's worth of payments, Bassett Furniture Industries stock has a trailing yield of around 1.4% on the current share price of $35.95. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.
Check out our latest analysis for Bassett Furniture Industries
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. Bassett Furniture Industries's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If Bassett Furniture Industries didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. The good news is it paid out just 11% of its free cash flow in the last year.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Bassett Furniture Industries was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Bassett Furniture Industries has delivered 15% dividend growth per year on average over the past 10 years.
Remember, you can always get a snapshot of Bassett Furniture Industries's financial health, by checking our visualisation of its financial health, here.
Final Takeaway
Is Bassett Furniture Industries worth buying for its dividend? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.
Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Bassett Furniture Industries. In terms of investment risks, we've identified 2 warning signs with Bassett Furniture Industries and understanding them should be part of your investment process.
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.
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.
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