Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see BKI Investment Company Limited (ASX:BKI) is about to trade ex-dividend in the next 4 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase BKI Investment's shares before the 14th of August in order to receive the dividend, which the company will pay on the 28th of August.
The company's next dividend payment will be AU$0.04 per share, and in the last 12 months, the company paid a total of AU$0.079 per share. Last year's total dividend payments show that BKI Investment has a trailing yield of 4.1% on the current share price of AU$1.95. If you buy this business for its dividend, you should have an idea of whether BKI Investment's dividend is reliable and sustainable. As a result, readers should always check whether BKI Investment 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. BKI Investment paid out 100% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances.
Generally, the higher a company's payout ratio, the more the dividend is at risk of being reduced.
See our latest analysis for BKI Investment
Click here to see how much of its profit BKI Investment paid out over the last 12 months.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see BKI Investment earnings per share are up 9.9% per annum over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, BKI Investment has lifted its dividend by approximately 0.9% a year on average.
The Bottom Line
From a dividend perspective, should investors buy or avoid BKI Investment? BKI Investment has been growing earnings per share at a reasonable rate, but over the last year its dividend was not well covered by earnings. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.
So if you're still interested in BKI Investment despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. For example - BKI Investment has 2 warning signs we think you should be aware of.
If you're in the market for strong dividend payers, we recommend checking our selection of top 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.