Badger Infrastructure Solutions (TSE:BDGI) Is Due To Pay A Dividend Of $0.18

The board of Badger Infrastructure Solutions Ltd. (TSE:BDGI) has announced that it will pay a dividend on the 15th of July, with investors receiving $0.18 per share. This means the annual payment is 1.8% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Badger Infrastructure Solutions

Badger Infrastructure Solutions' Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last payment was quite easily covered by earnings, but it made up 428% of 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.

The next year is set to see EPS grow by 36.7%. If the dividend continues on this path, the payout ratio could be 46% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the annual payment back then was $0.34, compared to the most recent full-year payment of $0.523. This works out to be a compound annual growth rate (CAGR) of approximately 4.4% a year over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's not great to see that Badger Infrastructure Solutions' earnings per share has fallen at approximately 2.3% 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.

The Dividend Could Prove To Be Unreliable

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. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Badger Infrastructure Solutions that investors need to be conscious of moving forward. 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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