It looks like Birchcliff Energy Ltd. (TSE:BIR) is about to go ex-dividend in the next 3 days. The ex-dividend date is usually set to be one business day before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase Birchcliff Energy's shares on or after the 15th of September will not receive the dividend, which will be paid on the 29th of September.
The company's next dividend payment will be CA$0.03 per share. Last year, in total, the company distributed CA$0.12 to shareholders. Looking at the last 12 months of distributions, Birchcliff Energy has a trailing yield of approximately 1.9% on its current stock price of CA$6.39. If you buy this business for its dividend, you should have an idea of whether Birchcliff Energy's dividend is reliable and sustainable. As a result, readers should always check whether Birchcliff Energy has been able to grow its dividends, or if the dividend might be cut.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Birchcliff Energy's payout ratio is modest, at just 34% of profit. A useful secondary check can be to evaluate whether Birchcliff Energy generated enough free cash flow to afford its dividend. It distributed 44% of its free cash flow as dividends, a comfortable payout level for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Check out our latest analysis for Birchcliff Energy
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. Birchcliff Energy's earnings have collapsed faster than Wile E Coyote's schemes to trap the Road Runner; down a tremendous 39% a year over the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Birchcliff Energy has delivered 1.8% dividend growth per year on average over the past 10 years.
Final Takeaway
Is Birchcliff Energy worth buying for its dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Birchcliff Energy's dividend merits.
On that note, you'll want to research what risks Birchcliff Energy is facing. For instance, we've identified 2 warning signs for Birchcliff Energy (1 is potentially serious) you should be aware of.
If you're in the market for strong dividend payers, we recommend checking 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.