Reliance Steel & Aluminum (NYSE:RS) Has Announced That It Will Be Increasing Its Dividend To $1.10
Reliance Steel & Aluminum Co.'s (NYSE:RS) dividend will be increasing from last year's payment of the same period to $1.10 on 22nd of March. Despite this raise, the dividend yield of 1.4% is only a modest boost to shareholder returns.
View our latest analysis for Reliance Steel & Aluminum
Reliance Steel & Aluminum's Earnings Easily Cover The Distributions
If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Reliance Steel & Aluminum's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.
Looking forward, earnings per share is forecast to fall by 23.8% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 26%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Reliance Steel & Aluminum Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the annual payment back then was $1.20, compared to the most recent full-year payment of $4.40. This means that it has been growing its distributions at 14% per annum over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Reliance Steel & Aluminum has been growing its earnings per share at 21% a year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.
Reliance Steel & Aluminum Looks Like A Great Dividend Stock
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All in all, this checks a lot of the boxes we look for when choosing an income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Reliance Steel & Aluminum has 2 warning signs (and 1 which is concerning) we think you should know about. If you are a dividend investor, you might also want to look at our curated 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.
