Badger Infrastructure Solutions' (TSE:BDGI) Dividend Will Be $0.1725

The board of Badger Infrastructure Solutions Ltd. (TSE:BDGI) has announced that it will pay a dividend on the 15th of January, with investors receiving $0.1725 per share. This makes the dividend yield 1.7%, which will augment investor returns quite nicely.

Check out our latest analysis for Badger Infrastructure Solutions

Badger Infrastructure Solutions' Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Badger Infrastructure Solutions' dividend was only 42% of earnings, however it was paying out 193% of free cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share is forecast to rise by 124.1% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 27% by next year, which is in a pretty sustainable range.

Badger Infrastructure Solutions Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2013, the annual payment back then was $0.357, compared to the most recent full-year payment of $0.5. This works out to be a compound annual growth rate (CAGR) of approximately 3.4% a year over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

Dividend Growth Is Doubtful

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. It's not great to see that Badger Infrastructure Solutions' earnings per share has fallen at approximately 5.4% per year over the past five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Badger Infrastructure Solutions' payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for Badger Infrastructure Solutions that you should be aware of before investing. Is Badger Infrastructure Solutions not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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