How safe is the BCA Marketplace dividend payment?

BCA Marketplace (LON:BCA) is a mid cap Auto Vehicles, Parts & Service Retailers operator that specialises in the used-vehicle marketplace.

The group continues to grow fast - for the six months ended 30 September 2018, BCA Marketplace revenues increased 22% to £1.43bn and net income increased 35% to £34.9m. The group pays out an attractive rolling dividend yield of 3.92%, which is forecast to grow by 9.08% over the next year.

I'd like to know how safe BCA Marketplace's dividend is. Dividend cover (earnings per share divided by dividend per share) of two times or above is strong. Anything below one and a half times suggests we need to look a little closer.

Computing BCA Marketplace's dividend cover ratio

Poor dividend cover means that a small decline in earnings could consign your dividend payment to the scrap heap. It could also mean that the company is forgoing profitable investment opportunities that could generate future earnings growth. With that in mind, let’s take a look at BCA Marketplace dividend cover.

We can get all the information we need to see if BCA Marketplace has an adequate level of dividend cover from the group’s StockReport. The group’s trailing twelve month (TTM) EPS is 8.17p and its TTM dividend per share is 8.95p. 

Divide the former by the latter and we get a trailing twelve-month dividend cover for

Bca Marketplace of 0.91. This is below the 1.5 times cover limit that marks the point at which we should do some further digging on dividend sustainability and safety.

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