RE/MAX Holdings, Inc. (NYSE:RMAX) Is About To Go Ex-Dividend, And It Pays A 2.8% Yield
Readers hoping to buy RE/MAX Holdings, Inc. (NYSE:RMAX) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You can purchase shares before the 3rd of March in order to receive the dividend, which the company will pay on the 18th of March.
RE/MAX Holdings's next dividend payment will be US$0.22 per share. Last year, in total, the company distributed US$0.88 to shareholders. Last year's total dividend payments show that RE/MAX Holdings has a trailing yield of 2.8% on the current share price of $31.04. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether RE/MAX Holdings can afford its dividend, and if the dividend could grow.
Check out our latest analysis for RE/MAX Holdings
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. RE/MAX Holdings paid out 60% of its earnings to investors last year, a normal payout level for most businesses. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 23% of its cash flow last year.
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.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see RE/MAX Holdings earnings per share are up 4.0% per annum over the last five years. Earnings growth has been slim and the company is paying out more than half of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. RE/MAX Holdings has delivered an average of 23% per year annual increase in its dividend, based on the past six years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
The Bottom Line
Should investors buy RE/MAX Holdings for the upcoming dividend? Earnings per share growth has been modest and RE/MAX Holdings paid out over half of its profits and less than half of its free cash flow, although both payout ratios are within normal limits. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.
Ever wonder what the future holds for RE/MAX Holdings? See what the seven analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
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