Advertisement
Canada markets open in 9 hours 22 minutes
  • S&P/TSX

    22,813.75
    -58.90 (-0.26%)
     
  • S&P 500

    5,555.74
    -8.67 (-0.16%)
     
  • DOW

    40,358.09
    -57.35 (-0.14%)
     
  • CAD/USD

    0.7248
    -0.0010 (-0.14%)
     
  • CRUDE OIL

    77.27
    +0.31 (+0.40%)
     
  • Bitcoin CAD

    91,038.62
    -2,162.81 (-2.32%)
     
  • CMC Crypto 200

    1,363.06
    -22.20 (-1.60%)
     
  • GOLD FUTURES

    2,417.40
    +10.10 (+0.42%)
     
  • RUSSELL 2000

    2,243.27
    +22.62 (+1.02%)
     
  • 10-Yr Bond

    4.2390
    -0.0210 (-0.49%)
     
  • NASDAQ futures

    19,797.50
    -127.50 (-0.64%)
     
  • VOLATILITY

    14.72
    -0.19 (-1.27%)
     
  • FTSE

    8,167.37
    -31.41 (-0.38%)
     
  • NIKKEI 225

    39,336.09
    -258.30 (-0.65%)
     
  • CAD/EUR

    0.6680
    -0.0002 (-0.03%)
     

Birchcliff Energy Ltd. (TSE:BIR) Passed Our Checks, And It's About To Pay A CA$0.20 Dividend

It looks like Birchcliff Energy Ltd. (TSE:BIR) is about to go ex-dividend in the next four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Birchcliff Energy's shares before the 14th of March in order to be eligible for the dividend, which will be paid on the 31st of March.

The company's next dividend payment will be CA$0.20 per share, which looks like a nice increase on last year, when the company distributed a total of CA$0.08 to shareholders. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Birchcliff Energy can afford its dividend, and if the dividend could grow.

View our latest analysis for Birchcliff Energy

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Birchcliff Energy has a low and conservative payout ratio of just 2.3% of its income after tax. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Luckily it paid out just 3.8% of its free cash flow last year.

ADVERTISEMENT

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Birchcliff Energy has grown its earnings rapidly, up 62% a year for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Birchcliff Energy looks like a promising growth company.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last six years, Birchcliff Energy has lifted its dividend by approximately 41% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Is Birchcliff Energy worth buying for its dividend? Birchcliff Energy has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past six years, but the conservative payout ratio makes the current dividend look sustainable. Birchcliff Energy looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while Birchcliff Energy has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 1 warning sign for Birchcliff Energy and you should be aware of this before buying any shares.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here