Is It Smart To Buy Bird Construction Inc. (TSE:BDT) Before It Goes Ex-Dividend?

By
Simply Wall St
Published
November 24, 2021
TSX:BDT
Source: Shutterstock

Bird Construction Inc. (TSE:BDT) stock is about to trade ex-dividend in four days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Bird Construction's shares before the 29th of November to receive the dividend, which will be paid on the 20th of December.

The company's next dividend payment will be CA$0.033 per share, on the back of last year when the company paid a total of CA$0.39 to shareholders. Last year's total dividend payments show that Bird Construction has a trailing yield of 3.8% on the current share price of CA$10.18. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Bird Construction can afford its dividend, and if the dividend could grow.

View our latest analysis for Bird Construction

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Bird Construction paid out a comfortable 39% of its profit last year. A useful secondary check can be to evaluate whether Bird Construction generated enough free cash flow to afford its dividend. It paid out 12% of its free cash flow as dividends last year, which is conservatively low.

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.

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

historic-dividend
TSX:BDT Historic Dividend November 24th 2021

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Bird Construction's earnings per share have risen 15% per annum over the last five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Bird Construction has seen its dividend decline 5.1% per annum on average over the past 10 years, which is not great to see. Bird Construction is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

To Sum It Up

Is Bird Construction an attractive dividend stock, or better left on the shelf? Bird Construction has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. It's a promising combination that should mark this company worthy of closer attention.

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

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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Simply Wall St is focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of data scientists and multiple equity analysts with over two decades worth of financial markets experience between them.