Yahoo Finance Is Birchcliff Energy Ltd. (TSE:BIR) A Smart Pick For Income Investors?
Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. In the last few years Birchcliff Energy Ltd. (TSE:BIR) has paid a dividend to shareholders. Today it yields 3.8%. Does Birchcliff Energy tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
Check out our latest analysis for Birchcliff Energy
5 questions to ask before buying a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
Is their annual yield among the top 25% of dividend payers?
Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
Has the amount of dividend per share grown over the past?
Does earnings amply cover its dividend payments?
Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does Birchcliff Energy fit our criteria?
The current trailing twelve-month payout ratio for the stock is 51%, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 19% which, assuming the share price stays the same, leads to a dividend yield of 3.8%. However, EPS should increase to CA$0.38, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. The reality is that it is too early to consider Birchcliff Energy as a dividend investment. It has only been consistently paying dividends for 2 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Relative to peers, Birchcliff Energy produces a yield of 3.8%, which is on the low-side for Oil and Gas stocks.
Next Steps:
Taking all the above into account, Birchcliff Energy is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three fundamental factors you should look at:
Future Outlook: What are well-informed industry analysts predicting for BIR’s future growth? Take a look at our free research report of analyst consensus for BIR’s outlook.
Valuation: What is BIR worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether BIR is currently mispriced by the market.
Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
