Readers hoping to buy BWX Technologies, Inc. (NYSE:BWXT) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. This means that investors who purchase shares on or after the 6th of March will not receive the dividend, which will be paid on the 26th of March.
BWX Technologies's next dividend payment will be US$0.19 per share, on the back of last year when the company paid a total of US$0.76 to shareholders. Based on the last year's worth of payments, BWX Technologies stock has a trailing yield of around 1.4% on the current share price of $54.84. 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 BWX Technologies can afford its dividend, and if the dividend could grow.
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. Fortunately BWX Technologies's payout ratio is modest, at just 27% of profit. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Dividends consumed 67% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
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.
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. It's encouraging to see BWX Technologies has grown its earnings rapidly, up 49% a year for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last seven years, BWX Technologies has lifted its dividend by approximately 13% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
To Sum It Up
Is BWX Technologies an attractive dividend stock, or better left on the shelf? Earnings per share have grown at a nice rate in recent times and over the last year, BWX Technologies paid out less than half its earnings and a bit over half its free cash flow. BWX Technologies looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
Curious what other investors think of BWX Technologies? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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