Ranger Energy Services, Inc. (NYSE:RNGR) Looks Interesting, And It's About To Pay A Dividend
Ranger Energy Services, Inc. (NYSE:RNGR) is about to trade ex-dividend in the next four 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. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Ranger Energy Services' shares before the 14th of March to receive the dividend, which will be paid on the 5th of April.
The company's upcoming dividend is US$0.05 a share, following on from the last 12 months, when the company distributed a total of US$0.20 per share to shareholders. Based on the last year's worth of payments, Ranger Energy Services stock has a trailing yield of around 1.8% on the current share price of US$11.17. 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 Ranger Energy Services can afford its dividend, and if the dividend could grow.
View our latest analysis for Ranger Energy Services
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Ranger Energy Services paid out just 10% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 4.4% 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?
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 fall far enough, the company could be forced to cut its dividend. It's encouraging to see Ranger Energy Services has grown its earnings rapidly, up 29% a year for the past five years. Ranger Energy Services earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'
Given that Ranger Energy Services has only been paying a dividend for a year, there's not much of a past history to draw insight from.
The Bottom Line
Should investors buy Ranger Energy Services for the upcoming dividend? We love that Ranger Energy Services is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. There's a lot to like about Ranger Energy Services, and we would prioritise taking a closer look at it.
So while Ranger Energy Services looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Every company has risks, and we've spotted 1 warning sign for Ranger Energy Services you should know about.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
