Don't Race Out To Buy BK Technologies Corporation (NYSEMKT:BKTI) Just Because It's Going Ex-Dividend
BK Technologies Corporation (NYSEMKT:BKTI) stock is about to trade ex-dividend in 2 days. You can purchase shares before the 2nd of July in order to receive the dividend, which the company will pay on the 20th of July.
BK Technologies's next dividend payment will be US$0.02 per share, and in the last 12 months, the company paid a total of US$0.08 per share. Looking at the last 12 months of distributions, BK Technologies has a trailing yield of approximately 2.3% on its current stock price of $3.43. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.
Check out our latest analysis for BK Technologies
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. BK Technologies lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If BK Technologies 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.
Click here to see how much of its profit BK Technologies paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. BK Technologies reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. BK Technologies's dividend payments per share have declined at 31% per year on average over the past four years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.
Get our latest analysis on BK Technologies's balance sheet health here.
Final Takeaway
Is BK Technologies an attractive dividend stock, or better left on the shelf? It's hard to get used to BK Technologies paying a dividend despite reporting a loss over the past year. Worse, the dividend was not well covered by cash flow. It's not that we think BK Technologies is a bad company, but these characteristics don't generally lead to outstanding dividend performance.
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 BK Technologies. To help with this, we've discovered 4 warning signs for BK Technologies (1 doesn't sit too well with us!) that you ought to be aware of before buying the shares.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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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