Bird Construction Inc. (TSE:BDT) Looks Interesting, And It's About To Pay A Dividend

Simply Wall St · 03/22/2024 10:26

Readers hoping to buy Bird Construction Inc. (TSE:BDT) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. In other words, investors can purchase Bird Construction's shares before the 27th of March in order to be eligible for the dividend, which will be paid on the 19th of April.

The company's upcoming dividend is CA$0.0467 a share, following on from the last 12 months, when the company distributed a total of CA$0.56 per share to shareholders. Calculating the last year's worth of payments shows that Bird Construction has a trailing yield of 3.0% on the current share price of CA$18.92. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Bird Construction

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. That's why it's good to see Bird Construction paying out a modest 32% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out more than half (50%) of its free cash flow in the past year, which is within an average range 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.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
TSX:BDT Historic Dividend March 22nd 2024

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Bird Construction has grown its earnings rapidly, up 34% a year for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Bird Construction's dividend payments per share have declined at 3.0% per year on average over the past 10 years, which is uninspiring. Bird Construction is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

Final Takeaway

Is Bird Construction an attractive dividend stock, or better left on the shelf? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. Overall we think this is an attractive combination and worthy of further research.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Every company has risks, and we've spotted 1 warning sign for Bird Construction you should know about.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.