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Bird Construction Inc. (TSE:BDT) will increase its dividend from last year's comparable payment on the 20th of December to CA$0.07. This takes the dividend yield to 2.8%, which shareholders will be pleased with.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Bird Construction's stock price has increased by 33% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
See our latest analysis for Bird Construction
Bird Construction's Future Dividend Projections Appear Well Covered By Earnings
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, prior to this announcement, Bird Construction was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The business is returning a large chunk of its cash to shareholders, which means it is not being used to grow the business.
Looking forward, earnings per share is forecast to rise by 127.3% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 14% by next year, which is in a pretty sustainable range.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was CA$0.76 in 2014, and the most recent fiscal year payment was CA$0.84. This means that it has been growing its distributions at 1.0% per annum over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Bird Construction has seen EPS rising for the last five years, at 56% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.
Our Thoughts On Bird Construction's Dividend
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. Overall, we don't think this company has the makings of a good income stock.