Investors who want to cash in on Rocky Mountain Dealerships Inc’s (TSX:RME) upcoming dividend of CA$0.12 per share have only 4 days left to buy the shares before its ex-dividend date, 30 May 2018, in time for dividends payable on the 29 June 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into Rocky Mountain Dealerships’s latest financial data to analyse its dividend attributes. See our latest analysis for Rocky Mountain Dealerships
5 questions to ask before buying a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is it paying an annual yield above 75% of dividend payers?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has dividend per share risen in the past couple of years?
- Is it able to pay the current rate of dividends from its earnings?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does Rocky Mountain Dealerships fit our criteria?
The company currently pays out 43.15% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward. Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. In the case of RME it has increased its DPS from CA$0.18 to CA$0.46 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock. In terms of its peers, Rocky Mountain Dealerships generates a yield of 4.19%, which is high for Trade Distributors stocks but still below the market’s top dividend payers.
Keeping in mind the dividend characteristics above, Rocky Mountain Dealerships is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three relevant factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for RME’s future growth? Take a look at our free research report of analyst consensus for RME’s outlook.
- Valuation: What is RME worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether RME is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.