Shares in B&M European Worth (LSE:BME) may very well be a passive revenue goldmine for buyers in 2025 – and past. On high of its standard dividend, the agency simply introduced a one-off £151m distribution.

Which means the corporate is ready to return slightly below 10% of its market cap to shareholders this yr in money. However buyers pondering of leaping on the alternative ought to think about a couple of issues first.

The problems

B&M introduced the particular dividend this week as a part of its buying and selling replace for the interval masking the final three months of 2024. However the report as a complete went down like a lead balloon. 

Adjusting for change charges, revenues have been 2.8% greater than the earlier yr. And whereas earnings have been additionally greater (by an unspecified quantity), that’s largely the place the excellent news ended for buyers.

Gross sales development was totally the results of the corporate rising its retailer rely. On common, revenues per outlet have been down 2.8% – and that is the continuation of a worrying pattern. 

Like-for-like gross sales have been down 1.9% within the earlier quarter and 5.1% within the one earlier than that. That’s why the inventory has been falling so persistently over the past 9 months.

Ultimately, that has to alter if B&M goes to keep away from stagnation. The corporate isn’t going to have the ability to hold opening shops indefinitely with out them getting in one another’s approach.

The present charge of retailer enlargement is round 6%. So except the decline in like-for-like gross sales can cease quickly, the enterprise goes to search out its income development falls behind inflation, which might be an issue.

Dividends

A £151m particular dividend – equal to 15p per share – seems like a outcome for shareholders. However that is beneath what B&M has distributed in earlier years.

Over the past 5 years, the corporate has paid one-off distributions of both 25p or 20p per share annually. So the 15p announcement from this week represents a dividend minimize.

I feel this could make B&M shareholders consider carefully concerning the outlook for the dividend in 2025. However there are additionally some clear causes for optimism.

Whereas like-for-like gross sales have been decrease over the past quarter, administration reported that these began to enhance in December. And the corporate is beginning 2025 in a robust stock place.

The inventory has additionally reached a degree the place it may very well be a very good passive revenue funding with out the enterprise rising. The common dividend plus the particular distribution quantities to a yield of 9.72%. After all, dividends are by no means assured.

This implies a £20,000 funding at the moment might return £1,944 in dividends this yr. And that’s sufficient to make me take it significantly.

Alternative?

A 9.72% dividend yield is the sort of factor that buyers sometimes discover with tobacco corporations. However in contrast to British American Tobacco, I don’t consider B&M’s core enterprise is in terminal decline. 

Like-for-like gross sales have been going backwards, however the firm as a complete continues to maneuver ahead. The inventory is dangerous, however I feel buyers on the lookout for passive revenue ought to significantly think about it.