Should You Buy BW Epic Kosan Ltd. (OB:BWEK) For Its Upcoming Dividend?

BW Epic Kosan Ltd. (OB:BWEK) is about to trade ex-dividend in the next 3 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Meaning, you will need to purchase BW Epic Kosan's shares before the 2nd of March to receive the dividend, which will be paid on the 13th of March.

The company's next dividend payment will be US$0.039 per share. Last year, in total, the company distributed US$0.056 to shareholders. Calculating the last year's worth of payments shows that BW Epic Kosan has a trailing yield of 4.1% on the current share price of NOK19.8. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for BW Epic Kosan

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. BW Epic Kosan paid out more than half (52%) of its earnings last year, which is a regular payout ratio for most companies.

Click here to see how much of its profit BW Epic Kosan paid out over the last 12 months.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see BW Epic Kosan's earnings have been skyrocketing, up 88% per annum for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. With a reasonable payout ratio, profits being reinvested, and some earnings growth, BW Epic Kosan 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. BW Epic Kosan's dividend payments per share have declined at 26% per year on average over the past two years, which is uninspiring. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.

Final Takeaway

Has BW Epic Kosan got what it takes to maintain its dividend payments? BW Epic Kosan has an acceptable payout ratio and its earnings per share have been improving at a decent rate. We think this is a pretty attractive combination, and would be interested in investigating BW Epic Kosan more closely.

In light of that, while BW Epic Kosan has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 2 warning signs for BW Epic Kosan that we strongly recommend you have a look at before investing in the company.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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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.