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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Badger Infrastructure Solutions Ltd. (TSE:BDGI) is about to trade ex-dividend in the next four days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible 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. This means that investors who purchase Badger Infrastructure Solutions' shares on or after the 30th of December will not receive the dividend, which will be paid on the 17th of January.
The company's next dividend payment will be CA$0.052 per share, and in the last 12 months, the company paid a total of CA$0.63 per share. Based on the last year's worth of payments, Badger Infrastructure Solutions has a trailing yield of 2.0% on the current stock price of CA$31. If you buy this business for its dividend, you should have an idea of whether Badger Infrastructure Solutions's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
View our latest analysis for Badger Infrastructure Solutions
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Badger Infrastructure Solutions paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. It paid out 103% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect - but we'd generally want look more closely here.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Badger Infrastructure Solutions reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.