Last update on 2024-06-27

Barrett Business Services (BBSI) - Dividend Analysis (Final Score: 6/8)

Explore Barrett Business Services (BBSI) dividend's performance and stability. Final Score: 6/8. Learn about the 8-criteria scoring system.

Short Analysis - Dividend Score: 6

We're running Barrett Business Services (BBSI) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield indicates how much a company pays out in dividends each year relative to its stock price.

Barrett Business Services (BBSI) has a current dividend yield of 1.0363%, which is notably lower than the industry average of 2.6%. Over the past 20 years, BBSI's dividend yield has seen considerable fluctuation—from non-existent dividends prior to 2006, peaking at 2.9358% in 2008, to its current rate. Despite a substantial increase in stock price from $8.65 in 2003 to $115.80 in 2023, the relatively low current dividend yield may be indicative of a reallocation of earnings toward growth or other operational investments rather than shareholder payouts. This creates a mixed picture: while the ongoing growth in stock price is favorable, the lower-than-average yield could be unattractive to income-focused investors. Consequently, the current trend can be viewed as suboptimal from a dividend income perspective.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate is a crucial metric that indicates how much a company's dividend payments have increased over a specified period, typically indicating the company's financial health and stability.

Based on the provided data, Barrett Business Services (BBSI) does not consistently meet a 5% dividend growth rate over the last 20 years. The dividend per share ratio fluctuates significantly, with several years of no dividend payments at all. For instance, dividends were not paid from 2003 to 2006, in 2009, 2016, 2019, and 2020, and the most recent years (2021-2023) show no dividends either. However, notable spikes occurred in specific years like 2007 (314.2857%) and 2014 (33.3333%), but these appear to be outliers rather than a consistent trend. The inconsistent dividend payouts and the average dividend ratio of 22.37% suggest that BBSI lacks the stability and consistency typically associated with strong dividend-paying stocks. Therefore, the trend does not meet the positive criterion of a stable and growing dividend over the long term.

Average annual Payout Ratio lower than 65% in the last 20 years?

The payout ratio measures how much of a company's earnings are paid out as dividends. A lower payout ratio is often seen as positive.

Barrett Business Services (BBSI) has maintained an average payout ratio of 15.62% over the past 20 years. This figure is significantly lower than the 65% threshold, which is typically seen as a benchmark for sustainability. A payout ratio below this threshold indicates that the company is not overleveraging its earnings to pay dividends, thus retaining more capital for reinvestment or cushioning against unforeseen financial difficulties. The trend shows consistency and financial prudence, making it a positive indicator for the company’s dividend sustainability. Overall, this is a good trend for BBSI.

Dividends Well Covered by Earnings?

Dividends being well covered by earnings is vital because it ensures that the company is financially healthy enough to sustain its dividend payouts. Companies with high earning cover can manage to pay dividends even during downturns.

Analyzing the data from Barrett Business Services (BBSI) from 2003 to 2023, there is a clear coverage fluctuation of dividends by earnings. The most concerning periods were in 2008 and 2014, with earnings significantly lower than dividends, indicated by coverage ratios of 0.57 (2008) and -0.20 (2014). The EPS was even negative in years like 2009, signaling financial strain, hence indicating a poor financial health during these years. However, from 2015 onwards, the dividends seem to be better covered by earnings, with more positive coverage ratios like 0.17 (2019) and 0.16 (2023). Nevertheless, the dividend coverage on average is below 1, indicating that Barrett Business Services struggles to ensure its dividends are well-backed by earnings, thus raising concerns about the sustainability of its dividend payments.

Dividends Well Covered by Cash Flow?

Understanding why dividends being well covered by cash flow is crucial for investors, in assessing the financial health of Barrett Business Services (BBSI).

Dividends should ideally be well covered by free cash flow (FCF). This metric is important as it indicates a company's ability to generate enough cash to support its dividend payouts without the need for external financing. Over the past two decades, BBSI’s FCF has generally been positive, except during 2019 and 2020 where it showed negative values, potentially affecting the company's capacity to cover dividends. In most normal years, the dividend coverage ratio is well below 1 (100%), showing that BBSI efficiently covers its dividends with cash flow. A coverage ratio consistently below 1 is a positive indicator of dividend sustainability, but sporadic high ratios or negative values indicate occasional financial strain. Overall, the trend for BBSI in covering dividends with cash flow is mixed, but largely sustainable.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividend payments are crucial for income-seeking investors, ensuring a reliable income stream and often indicating robust financial health and strategic allocation of capital.

The dividend history of Barrett Business Services (BBSI) over the past 20 years shows overall growth in dividend payments. Starting with no dividend payments from 2003 to 2006, the company began issuing dividends in 2007 and has since shown a general upward trend with some stability. However, there are years identified where the dividend per share has fallen by more than 20%, indicating some volatility that income-seeking investors need to be wary of. Specifically, observing the drop from $0 in 2005 to $0.07 in 2006 doesn’t exemplify a significant cut, as the initiation of dividends often starts at nominal amounts. Therefore, it's safe to say the 20% drop constraint symptomatically observed affects during the folding mechanism in years, yet the data above suggests BBSI navigates dividend yielding effectively engraining market forces consistently.

Dividends Paid for Over 25 Years?

A consistent history of dividends paid over 25 years implies reliability and stability in rewarding shareholders.

Barrett Business Services (BBSI) has not paid dividends consistently over 25 years. The data shows the company began paying dividends in 2006, giving us just about 17 years of dividend history. While this shows a strong commitment to returning value to shareholders for a significant period, it does not meet the 25-year criterion. This falls short by roughly 8 years, which can indicate that BBSI needs more time to prove sustained reliability in its dividend payments. Although not a negative trend, it lacks proof of long-term commitment required by the 25-year benchmark, inherently making it less favorable for investors seeking long-term dividend reliability.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases refer to a company's consistent buying back of its own shares over an extended period. This is important as it often signals confidence in the company's future prospects and can lead to higher earnings per share (EPS) by reducing the number of outstanding shares.

Barrett Business Services (BBSI) has shown a commitment to stock repurchases over the past 20 years. The number of shares outstanding has mostly decreased from 11,654,000 in 2007 to 6,731,000 in 2023, indicating a steady repurchase program. The average repurchase of -1.0735% annually reveals a consistent reduction in shares, which is a positive sign of the company's confidence in its growth prospects. The repurchases have particularly been reliable in the years 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2019, 2021, 2022, and 2023. This trend is favorable as long-term and consistent buybacks often reflect a well-managed capital allocation strategy aimed at enhancing shareholder value. However, the interruptions in some years may warrant closer scrutiny into their causative factors, such as market conditions or internal financial strategies.