Birchcliff Energy (TSE:BIR) Will Pay A Larger Dividend Than Last Year At CA$0.20

Birchcliff Energy Ltd.'s (TSE:BIR) dividend will be increasing from last year's payment of the same period to CA$0.20 on 31st of March. This will take the annual payment to 9.5% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Birchcliff Energy

Birchcliff Energy Is Paying Out More Than It Is Earning

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Birchcliff Energy was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to fall by 87.1% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 117%, which is definitely a bit high to be sustainable going forward.

Birchcliff Energy's Dividend Has Lacked Consistency

Looking back, Birchcliff Energy's dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 6 years was CA$0.10 in 2017, and the most recent fiscal year payment was CA$0.80. This means that it has been growing its distributions at 41% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Birchcliff Energy has impressed us by growing EPS at 62% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Birchcliff Energy Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Birchcliff Energy is a strong income stock thanks to its track record and growing earnings. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Birchcliff Energy that investors should know about before committing capital to this stock. Is Birchcliff Energy not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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