Barrett Business Services, Inc. (NASDAQ:BBSI) shares will trade ex-dividend in four days. The ex-dividend date is one day before the record date, the date by which shareholders must be on the company’s books to receive a dividend. The ex-dividend date matters because whenever a stock is bought or sold, it takes at least two business days for the trade to settle. That means you need to buy Barrett Business Services stock before Nov. 17 to receive the dividend, which will be paid on Dec. 2.
The company’s next dividend payment will be $0.30 per share after the company paid a total of $1.20 to shareholders last year. Based on last year’s payments, Barrett Business Services has a trailing yield of 1.2% on its current share price of $96.45. We’re happy when companies pay dividends, but it’s also important to be sure that laying the golden eggs doesn’t kill our golden goose! Therefore, we should always check whether the dividend payments appear sustainable and the company is growing.
Try this chances and risks in the US service industry.
Dividends are usually paid out of company income. So when a company pays out more than it earns, there’s usually a higher risk of having its dividend cut. Barrett Business Services has a low and conservative payout ratio of just 19% of its after-tax income. Even more important than the profits, however, are the cash flows for calculating a dividend. As such, we need to see if the company has generated enough cash to pay its distribution. It paid out 31% of its free cash flow as a dividend, a comfortable payout for most companies.
It’s encouraging to see that the dividend is being covered by both earnings and cash flow. This generally suggests that the dividend is sustainable as long as earnings don’t fall abruptly.
Click here to view the company’s payout ratio and analyst estimates of its future dividends.
Have profits and dividends grown?
Stocks in companies that generate sustainable earnings growth often offer the best dividend prospects, since it’s easier to increase the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. It’s encouraging to see that Barrett Business Services has grown its earnings by 21% annually over the past five years. Earnings per share have grown very quickly, and the company pays out a relatively small percentage of its earnings and cash flow. It’s a very favorable combination that over the long term can often result in dividends multiplying as earnings grow and the company pays out a higher percentage of its earnings.
Another important way to measure a company’s dividend prospects is to measure its historical dividend growth rate. Barrett Business Services has delivered a compound annual increase in its dividend of 11% per year based on dividend payments over the past 10 years. It’s exciting to see that both earnings and dividends per share have grown rapidly over the past several years.
Should Investors Buy Barrett Business Services for Upcoming Dividend? Barrett Business Services has grown profits quickly and has a conservatively low payout ratio, meaning it reinvests heavily in its business; a sterling combination. There’s a lot to like about Barrett Business Services, and we’d prioritize taking a closer look.
With that in mind, you should research the risks Barrett Business Services faces. You should find out more about this 2 warning signs We spotted Barrett Business Services (among them 1, which is a bit awkward).
In general, we wouldn’t recommend simply buying the first dividend stock you see. Here is a curated list of interesting stocks that are strong dividend payers.
The assessment is complex, but we help to simplify it.
find out if Barrett business services may be over or under priced by reviewing our comprehensive analysis which includes the following Fair Value Estimates, Risks and Warnings, Dividends, Insider Trading and Financial Health.
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This Simply Wall St article is of a general nature. We provide comments based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended as financial advice. It is not a recommendation to buy or sell any stock and does not take into account your goals or financial situation. Our goal is to offer you long-term focused analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned.