Bottom Line: Failing the bullet test

BLACKS Leisure, the camping and sports goods retailer, is a prime example of a company that failed to bite hard enough on the dividend bullet.

In 1992/3 Blacks cut its dividend by 33 per cent to 2.25p when it chalked up losses of 7.66p a share.

But if it had bitten harder Blacks would not have found itself yesterday in the position of paying another 2.25p for the year to 26 February out of earnings of just 2.4p.

This Dorrellesque payout left Blacks, which needs every penny it can get to sustain a recovery, with retained profits of just pounds 47,000.

Its capital expenditure programme is already tiny - it runs below depreciation - but Blacks needs to open more stores to back up the fragile recovery in existing outlets.

At best Blacks could lift pre-tax profits this year from pounds 928,000 to pounds 1.5m. This would give earnings of 4p or a p/e of 11 at 44p, but only after a low tax charge of 10 per cent. A yield of 7 per cent shows that the dividend is not yet seen as cast-iron.