Rathbones Group Plc (LON:RAT) stock is about to trade ex-dividend in 3 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Accordingly, Rathbones Group investors that purchase the stock on or after the 1st of September will not receive the dividend, which will be paid on the 4th of October.
The company's next dividend payment will be UK£0.28 per share, and in the last 12 months, the company paid a total of UK£0.82 per share. Calculating the last year's worth of payments shows that Rathbones Group has a trailing yield of 4.5% on the current share price of £18.04. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Rathbones Group has been able to grow its dividends, or if the dividend might be cut.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. It paid out 77% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. It could become a concern if earnings started to decline.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Rathbones Group earnings per share are up 6.1% per annum over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Rathbones Group has lifted its dividend by approximately 6.0% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
Should investors buy Rathbones Group for the upcoming dividend? Rathbones Group has been generating some growth in earnings per share while paying out more than half of its earnings to shareholders in the form of dividends. 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 on the fence about its dividend prospects.
Ever wonder what the future holds for Rathbones Group? See what the 10 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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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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.
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