The board of Boise Cascade Company (NYSE:BCC) has announced that it will pay a dividend of $0.21 per share on the 18th of June. This makes the dividend yield 6.1%, which will augment investor returns quite nicely.

Our free stock report includes 3 warning signs investors should be aware of before investing in Boise Cascade. Read for free now.

Boise Cascade's Future Dividend Projections Appear Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Boise Cascade was paying only paying out a fraction of earnings, but the payment was a massive 106% of cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Looking forward, earnings per share is forecast to rise by 3.5% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 68%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for Boise Cascade

Boise Cascade's Dividend Has Lacked Consistency

Boise Cascade has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. The annual payment during the last 7 years was $0.28 in 2018, and the most recent fiscal year payment was $5.84. This means that it has been growing its distributions at 54% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Boise Cascade has impressed us by growing EPS at 37% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Our Thoughts On Boise Cascade's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Boise Cascade has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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