Last update on 2024-06-27

Bassett Furniture Industries (BSET) - Dividend Analysis (Final Score: 4/8)

Analyze Bassett Furniture Industries' (BSET) dividend policy using an 8-criteria scoring system with a final score of 4/8. Review key factors and historical data.

Short Analysis - Dividend Score: 4

We're running Bassett Furniture Industries (BSET) 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 is the annual dividend payment to shareholders expressed as a percentage of the stock's current price. It is a critical metric for investors looking to generate income from their investments without selling shares. High dividend yields can indicate a profitable, shareholder-friendly company but may also suggest potential underlying financial problems. Low or average yields may suggest stable, less risky companies but might not attract income-focused investors.

Analyzing the dividend yield of Bassett Furniture Industries (BSET) over twenty years, we see a highly varied performance. The dividend yield in 2023 is 1.9277%, slightly lower than the industry average of 1.99%. Historically, the company has experienced significant fluctuations, with yield peaks reaching as high as 44.7761% in 2008 and zero yields recorded in 2009 and 2010. Most notably, the dividend yield has generally declined over the last decade compared to its much higher values in the early 2000s. Despite these fluctuations, the trend of convergence towards the industry average could be seen as a stabilization indicator. The modest yield in 2023 might indicate more sustainable and consistent financial strategies but could also be perceived as less attractive by income-focused investors. This trend is mixed; while stability is often valued, the relatively lower yield compared to historical highs may disappoint long-term investors accustomed to higher returns.

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

The Dividend Growth Rate criterion evaluates the percentage increase in dividend payouts over a sustained period. A rate higher than 5% indicates robust and consistent growth, suggesting the company’s profitability and shareholder value augmentation.

A comprehensive analysis of Bassett Furniture Industries' dividend per share ratio from 2003 to 2023 reveals significant volatility rather than a steady growth trajectory. The average dividend ratio stands at 15.95%, ostensibly meeting the 5% threshold, but the individual yearly changes range drastically. For instance, in 2023, there's a sharp decline of 84.76%, starkly contrasting with the 296.23% increase in 2022. Hence, although the average presents a favorable picture, the inconsistency, evidenced by dramatic rises and falls, indicates less reliable dividend growth and potential instability. Thus, this trend is not ideal for investors seeking steady returns, negating the criterion for robust dividend growth.

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

The payout ratio measures the proportion of earnings paid out as dividends to shareholders, ideally remaining below 65% for sustainability.

Over the last 20 years, Bassett Furniture Industries (BSET) has had a highly volatile payout ratio with an average of -80.71%. The payout ratio has been negative or above 65% for multiple years, signaling inconsistency in earnings and dividend payouts. For example, in 2003, the payout ratio was at an extreme -2000%, and similar negative ratios were observed in multiple years such as 2008 (-43.3551%) and 2019 (-263.1579%). High positive ratios were also seen in years like 2004 (115.942%) and 2005 (126.9841%). This inconsistency indicates potential instability, as ideal sustainable dividend policies should maintain a payout ratio below 65%. Therefore, based on this criterion, the trend for BSET is concerning.

Dividends Well Covered by Earnings?

Dividend coverage ratio indicates whether a company’s earnings are sufficient to cover its dividends. This is vital as consistent dividend payments require stable earnings and ensure investors that the company is financially healthy.

The Dividend Coverage Ratio for Bassett Furniture Industries showcases a fluctuation from -20.0 in 2003 to -0.888 in 2023. Periods where dividends are not covered by earnings (coverage ratio < 1) indicate potential issues, as seen between 2003-2023. Especially low or negative ratios highlight a risk to dividend sustainability. Notable is 2020’s high EPS ($6.9554) covering dividends (ratio ~0.301), indicating occasional strong performance. Falling below 1.0 consistently raises a red flag for financial health.

Dividends Well Covered by Cash Flow?

The analysis of whether a company's dividends are well covered by its free cash flow is essential. It helps assess if the company generates enough cash to sustain its dividend payments, which is a good indicator of dividend safety and reliability.

Bassett Furniture Industries (BSET) has had a highly inconsistent record in terms of covering dividends with free cash flow. The free cash flow has fluctuated notably from $16.3M in 2003 to -$24.3M in 2022, showing irregular and often negative cash generation. For instance, in 2010, the dividend payout ratio skyrocketed to an improbable 692.64 due to an exceptional circumstance with the payout amount reaching $4 billion. In several years like 2004, 2006-2008, 2010-2012, 2019, and 2022, the coverage was negative, indicating BSET was paying dividends while generating negative free cash flow—a sign of possible financial instability. Conversely, years like 2005 and 2021 showed excellent coverage ratios of 9.38 and 2.02 respectively. In general, the high volatility and substantial negative ratios indicate that dividend coverage by free cash flow in BSET is unreliable which could be alarming for dividend investors looking for consistency.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments, where the dividend per share did not drop by more than 20% over the past two decades, is of utmost importance for income-seeking investors.

Analyzing the dividend per share data over the past 20 years for Bassett Furniture Industries (BSET), the company’s dividend stability is quite concerning. The company has experienced significant fluctuations in its dividend payouts. For instance, from 2008 to 2009, dividends dropped to zero, causing a 100% decline. Additionally, dividends plummeted in 2011 and fluctuated heavily across the remaining years. This instability can be concerning for income-seeking investors who rely on steady dividend payments for their financial planning.

Dividends Paid for Over 25 Years?

Verifying whether a company has paid dividends consistently for over 25 years is a strong indicator of its financial health, stability, and commitment to returning value to shareholders. A company with such a track record is generally seen as reliable and less risky.

Bassett Furniture Industries (BSET) has a mixed dividend payment history from 1998 to 2023. While the company did pay dividends in most of the years listed, there were notable gaps. No dividends were paid in 2009, 2010, and 2011. Additionally, the dividend per share fluctuated significantly, especially in 2008, 2009-2011, and 2023, reflecting possible financial instability during those periods. The dividend per share dropped to as low as 0 in 2009-2011 before increasing again in subsequent years. While BSET has returned to providing dividends, the inconsistency and lack of payments in some years portray a less stable dividend history, which is a concern. Therefore, the trend indicates that BSET does not meet the 'Dividends Paid for Over 25 Years' criterion.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases refer to consistent buyback programs where a company buys back its shares from the marketplace. This signifies management’s confidence in the company’s prospects and can enhance shareholder value by reducing the number of shares outstanding.

Over the past 20 years, Bassett Furniture Industries has shown a commendable record of share repurchases. The company reduced its shares outstanding from 11,750,000 in 2003 to 8,808,333 in 2023. The average repurchase rate of -1.4073% per year further underscores the company’s consistent efforts in this regard. The decrement in shares exemplifies a robust buyback program in 14 out of the surveyed 21 years. This trend is positive, reflecting strong financial health and management's confidence in the company’s intrinsic value and future growth prospects.