Burckhardt Compression Holding (VTX:BCHN) Could Be A Buy For Its Upcoming Dividend

It looks like Burckhardt Compression Holding AG (VTX:BCHN) is about to go ex-dividend in the next three days. Typically, the ex-dividend date is two business days 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 of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. In other words, investors can purchase Burckhardt Compression Holding's shares before the 8th of July in order to be eligible for the dividend, which will be paid on the 10th of July.

The company's next dividend payment will be CHF018.00 per share, on the back of last year when the company paid a total of CHF18.00 to shareholders. Calculating the last year's worth of payments shows that Burckhardt Compression Holding has a trailing yield of 2.7% on the current share price of CHF0658.00. If you buy this business for its dividend, you should have an idea of whether Burckhardt Compression Holding's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Burckhardt Compression Holding is paying out an acceptable 58% of its profit, a common payout level among most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Thankfully its dividend payments took up just 28% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Burckhardt Compression Holding's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Check out our latest analysis for Burckhardt Compression Holding

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

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Burckhardt Compression Holding's earnings have been skyrocketing, up 27% per annum for the past five years. The current payout ratio suggests a good balance between rewarding shareholders with dividends, and reinvesting in growth. With a reasonable payout ratio, profits being reinvested, and some earnings growth, Burckhardt Compression Holding could have strong prospects for future increases to the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Burckhardt Compression Holding has lifted its dividend by approximately 6.1% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Is Burckhardt Compression Holding worth buying for its dividend? Burckhardt Compression Holding's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. Overall we think this is an attractive combination and worthy of further research.

While it's tempting to invest in Burckhardt Compression Holding for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 1 warning sign for Burckhardt Compression Holding you should know about.

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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.