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Rand Mining Limited (ASX:RND) Will Pay A AU$0.10 Dividend In Four Days
It looks like Rand Mining Limited (ASX:RND) is about to go ex-dividend in the next 4 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Therefore, if you purchase Rand Mining's shares on or after the 19th of November, you won't be eligible to receive the dividend, when it is paid on the 16th of December.
The company's upcoming dividend is AU$0.10 a share, following on from the last 12 months, when the company distributed a total of AU$0.10 per share to shareholders. Last year's total dividend payments show that Rand Mining has a trailing yield of 4.3% on the current share price of AU$2.34. 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.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Rand Mining paid out a comfortable 29% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Over the past year it paid out 123% of its free cash flow as dividends, which is uncomfortably high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.
While Rand Mining's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to Rand Mining's ability to maintain its dividend.
View our latest analysis for Rand Mining
Click here to see how much of its profit Rand Mining 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. For this reason, we're glad to see Rand Mining's earnings per share have risen 10% per annum over the last five years. Earnings have been growing at a decent rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Rand Mining's dividend payments are broadly unchanged compared to where they were nine years ago.
To Sum It Up
Is Rand Mining worth buying for its dividend? We like that Rand Mining has been successfully growing its earnings per share at a nice rate and reinvesting most of its profits in the business. However, we note the high cashflow payout ratio with some concern. Overall, it's hard to get excited about Rand Mining from a dividend perspective.
While it's tempting to invest in Rand Mining for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 2 warning signs with Rand Mining and understanding them should be part of your investment process.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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