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Bird Construction Inc. (TSE:BDT) has announced that it will pay a dividend of CA$0.07 per share on the 20th of March. This will take the annual payment to 3.9% of the stock price, which is above what most companies in the industry pay.
Check out our latest analysis for Bird Construction
Bird Construction's Payment Could Potentially Have Solid Earnings Coverage
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, based ont he last payment, Bird Construction was earning enough to cover the dividend pretty comfortably. However, with more than 75% of free cash flow being paid out to shareholders, future growth could potentially be constrained.
The next year is set to see EPS grow by 134.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 16% by next year, which is in a pretty sustainable range.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the annual payment back then was CA$0.76, compared to the most recent full-year payment of CA$0.84. This works out to be a compound annual growth rate (CAGR) of approximately 1.0% a year over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.
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 Bird Construction has grown earnings per share at 56% per year over the past five years. 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, we always like to see the dividend being raised, but we don't think Bird Construction will make a great income stock. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Bird Construction has been making. Overall, we don't think this company has the makings of a good income stock.
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 example, we've picked out 1 warning sign for Bird Construction that investors should know about before committing capital to this stock. Is Bird Construction not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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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.