BW Offshore Limited (OB:BWO) Goes Ex-Dividend Soon

BW Offshore Limited (OB:BWO) is about to trade ex-dividend in the next 2 days. This means that investors who purchase shares on or after the 25th of November will not receive the dividend, which will be paid on the 3rd of December.

BW Offshore's next dividend payment will be US$0.035 per share, on the back of last year when the company paid a total of US$0.14 to shareholders. Looking at the last 12 months of distributions, BW Offshore has a trailing yield of approximately 3.8% on its current stock price of NOK32.92. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for BW Offshore

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. BW Offshore reported a loss last year, so it's not great to see that it has continued paying a dividend. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. What's good is that dividends were well covered by free cash flow, with the company paying out 4.5% of its cash flow last year.

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

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. BW Offshore reported a loss last year, but at least the general trend suggests its income has been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. BW Offshore has seen its dividend decline 36% per annum on average over the past nine years, which is not great to see.

Remember, you can always get a snapshot of BW Offshore's financial health, by checking our visualisation of its financial health, here.

To Sum It Up

Is BW Offshore worth buying for its dividend? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of BW Offshore's dividend merits.

On that note, you'll want to research what risks BW Offshore is facing. Our analysis shows 2 warning signs for BW Offshore and you should be aware of these before buying any shares.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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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