Bell Financial Group Limited (ASX:BFG) will pay a dividend of AU$0.065 on the 16th of March. Based on this payment, the dividend yield on the company's stock will be 7.4%, which is an attractive boost to shareholder returns.

See our latest analysis for Bell Financial Group

Bell Financial Group's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last payment made up 80% of earnings, but cash flows were much higher. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

EPS is set to grow by 17.2% over the next year if recent trends continue. If recent patterns in the dividend continue, the payout ratio in 12 months could be 79% which is a bit high but can definitely be sustainable. historic-dividend

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The dividend has gone from AU$0.065 in 2012 to the most recent annual payment of AU$0.11. This means that it has been growing its distributions at 5.4% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Bell Financial Group's Dividend Might Lack Growth

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Bell Financial Group has seen EPS rising for the last five years, at 17% per annum. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Bell Financial Group's payments, as there could be some issues with sustaining them into the future. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for Bell Financial Group that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.