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Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Berry Corporation (NASDAQ:BRY) is about to go ex-dividend in just four days. You will need to purchase shares before the 12th of March to receive the dividend, which will be paid on the 15th of April.
Berry's next dividend payment will be US$0.04 per share. Last year, in total, the company distributed US$0.16 to shareholders. Last year's total dividend payments show that Berry has a trailing yield of 2.9% on the current share price of $5.51. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Berry can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Berry
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Berry reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 17% of its cash flow last year.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Berry was unprofitable last year, but at least the general trend suggests its earnings have been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Berry's dividend payments per share have declined at 31% per year on average over the past three years, which is uninspiring.