Is It Smart To Buy BWX Technologies, Inc. (NYSE:BWXT) Before It Goes Ex-Dividend?
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that BWX Technologies, Inc. (NYSE:BWXT) is about to go ex-dividend in just four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase BWX Technologies' shares before the 19th of November to receive the dividend, which will be paid on the 10th of December.
The company's next dividend payment will be US$0.27 per share, and in the last 12 months, the company paid a total of US$1.08 per share. Based on the last year's worth of payments, BWX Technologies has a trailing yield of 0.9% on the current stock price of US$122.97. If you buy this business for its dividend, you should have an idea of whether BWX Technologies's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
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. That's why it's good to see BWX Technologies paying out a modest 26% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It distributed 26% of its free cash flow as dividends, a comfortable payout level for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Check out our latest analysis for BWX Technologies
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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at BWX Technologies, with earnings per share up 7.0% on average over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, BWX Technologies has lifted its dividend by approximately 12% 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.
Final Takeaway
Is BWX Technologies an attractive dividend stock, or better left on the shelf? Earnings per share have been growing moderately, and BWX Technologies is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but BWX Technologies is being conservative with its dividend payouts and could still perform reasonably over the long run. There's a lot to like about BWX Technologies, and we would prioritise taking a closer look at it.
On that note, you'll want to research what risks BWX Technologies is facing. For example - BWX Technologies has 1 warning sign we think you should be aware of.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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