The board of Bisichi PLC (LON:BISI) has announced that it will pay a dividend of £0.03 per share on the 7th of February. This means the dividend yield will be fairly typical at 6.4%.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Bisichi's stock price has increased by 33% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for Bisichi

Bisichi's Projected Earnings Seem Likely To Cover Future Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. However, Bisichi's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, EPS could fall by 6.5% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could be 35%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from £0.04 total annually to £0.07. This works out to be a compound annual growth rate (CAGR) of approximately 5.8% a year over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

Dividend Growth May Be Hard To Come By

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Bisichi has seen earnings per share falling at 6.5% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Bisichi'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 be a touch cautious of relying on this stock primarily for the dividend income.

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. Case in point: We've spotted 4 warning signs for Bisichi (of which 1 can't be ignored!) you should know about. Is Bisichi not quite the opportunity you were looking for? Why not check out our selection of top 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.