Birchcliff Energy (TSE:BIR) Is Paying Out Less In Dividends Than Last Year

Birchcliff Energy Ltd.'s (TSE:BIR) dividend is being reduced by 70% to CA$0.03 per share on 31st of March, in comparison to last year's comparable payment of CA$0.10. This means the annual payment is 7.4% of the current stock price, which is above the average for the industry.

View our latest analysis for Birchcliff Energy

Birchcliff Energy's Future Dividends May Potentially Be At Risk

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before this announcement, Birchcliff Energy was paying out 874% of what it was earning, and not generating any free cash flows either. Paying out such a large dividend compared to earnings while also not generating any free cash flow would definitely be difficult to keep up.

Looking forward, EPS could fall by 13.0% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 907%, which is definitely a bit high to be sustainable going forward.

Birchcliff Energy's Dividend Has Lacked Consistency

It's comforting to see that Birchcliff Energy has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of CA$0.10 in 2017 to the most recent total annual payment of CA$0.40. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Birchcliff Energy's EPS has fallen by approximately 13% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

We're Not Big Fans Of Birchcliff Energy's Dividend

In summary, it's not great to see that the dividend is being cut, but it is probably understandable given that the current payment level was quite high. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. The dividend doesn't inspire confidence that it will provide solid income in the future.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Birchcliff Energy (1 is a bit unpleasant!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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