Bird Construction's (TSE:BDT) Dividend Will Be Increased To CA$0.0358

Bird Construction Inc. (TSE:BDT) has announced that it will be increasing its periodic dividend on the 20th of June to CA$0.0358, which will be 10% higher than last year's comparable payment amount of CA$0.0325. This takes the dividend yield to 5.0%, which shareholders will be pleased with.

View our latest analysis for Bird Construction

Bird Construction's Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Bird Construction was earning enough to cover the dividend, but it wasn't generating any free cash flows. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

The next year is set to see EPS grow by 54.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 26%, which is in the range that makes us comfortable with the sustainability of the dividend.

Bird Construction's Track Record Isn't Great

The dividend hasn't seen any major cuts in the last 10 years, but it has slowly been decreasing. The annual payment during the last 10 years was CA$0.72 in 2013, and the most recent fiscal year payment was CA$0.43. This works out to be a decline of approximately 5.0% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Looks Likely To Grow

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. We are encouraged to see that Bird Construction has grown earnings per share at 53% per year over the past five years. Bird Construction is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

Our Thoughts On Bird Construction's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

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. Case in point: We've spotted 2 warning signs for Bird Construction (of which 1 shouldn't be ignored!) you should know about. Is Bird Construction not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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