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Don't Race Out To Buy Bird Construction Inc. (TSE:BDT) Just Because It's Going Ex-Dividend

Simply Wall St

It looks like Bird Construction Inc. (TSE:BDT) is about to go ex-dividend in the next 4 days. Ex-dividend means that investors that purchase the stock on or after the 30th of July will not receive this dividend, which will be paid on the 20th of August.

Bird Construction's next dividend payment will be CA$0.033 per share. Last year, in total, the company distributed CA$0.39 to shareholders. Based on the last year's worth of payments, Bird Construction has a trailing yield of 7.2% on the current stock price of CA$5.43. If you buy this business for its dividend, you should have an idea of whether Bird Construction'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.

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. Bird Construction reported a loss last year, so it's not great to see that it has continued paying a dividend. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If Bird Construction didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. The good news is it paid out just 23% of its free cash flow in the last year.

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

TSX:BDT Historical Dividend Yield, July 25th 2019

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Bird Construction 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.

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 2.1% per year on average over the past 10 years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

We update our analysis on Bird Construction every 24 hours, so you can always get the latest insights on its financial health, here.

To Sum It Up

From a dividend perspective, should investors buy or avoid Bird Construction? It's hard to get used to Bird Construction paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.

Ever wonder what the future holds for Bird Construction? See what the four analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.