Just Four Days Till Richards Group Inc. (TSE:RIC) Will Be Trading Ex-Dividend
Richards Group Inc. (TSE:RIC) stock is about to trade ex-dividend in 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. 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. This means that investors who purchase Richards Group's shares on or after the 30th of October will not receive the dividend, which will be paid on the 13th of November.
The company's upcoming dividend is CA$0.11 a share, following on from the last 12 months, when the company distributed a total of CA$1.32 per share to shareholders. Looking at the last 12 months of distributions, Richards Group has a trailing yield of approximately 4.6% on its current stock price of CA$28.995. If you buy this business for its dividend, you should have an idea of whether Richards Group's dividend is reliable and sustainable. As a result, readers should always check whether Richards Group has been able to grow its dividends, or if the dividend might be cut.
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. Richards Group paid out 55% of its earnings to investors last year, a normal payout level for most businesses. 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. Fortunately, it paid out only 31% of its free cash flow in the past year.
It's positive to see that Richards Group'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 Richards Group
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're discomforted by Richards Group's 10% per annum decline in earnings in the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Richards Group has delivered an average of 4.1% per year annual increase in its dividend, based on the past 10 years of dividend payments. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it's always worth checking for when the company can't increase the payout ratio any more - because then the music stops.
To Sum It Up
Should investors buy Richards Group for the upcoming dividend? The payout ratios are within a reasonable range, implying the dividend may be sustainable. Declining earnings are a serious concern, however, and could pose a threat to the dividend in future. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.
So if you want to do more digging on Richards Group, you'll find it worthwhile knowing the risks that this stock faces. For example, we've found 1 warning sign for Richards Group that we recommend you consider before investing in the business.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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