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Birchcliff Energy's (TSE:BIR) Dividend Will Be Increased To CA$0.20

Birchcliff Energy Ltd. (TSE:BIR) will increase its dividend from last year's comparable payment on the 31st of March to CA$0.20. This will take the annual payment to 9.0% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Birchcliff Energy

Birchcliff Energy Doesn't Earn Enough To Cover Its Payments

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, Birchcliff Energy's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to fall by 87.1%. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 117%, which could put the dividend under pressure if earnings don't start to improve.

historic-dividend
historic-dividend

Birchcliff Energy's Dividend Has Lacked Consistency

Looking back, Birchcliff Energy's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. Since 2017, the dividend has gone from CA$0.10 total annually to CA$0.80. This implies that the company grew its distributions at a yearly rate of about 41% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Birchcliff Energy has grown earnings per share at 62% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like Birchcliff Energy's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Birchcliff Energy that investors should take into consideration. Is Birchcliff Energy not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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.

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