Reliance Worldwide (ASX:RWC) Is Due To Pay A Dividend Of $0.0775
Reliance Worldwide Corporation Limited (ASX:RWC) will pay a dividend of $0.0775 on the 6th of October. This makes the dividend yield 3.8%, which will augment investor returns quite nicely.
Check out our latest analysis for Reliance Worldwide
Reliance Worldwide's Payment Has Solid Earnings Coverage
If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Reliance Worldwide's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
The next year is set to see EPS grow by 21.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 75% by next year, which is in a pretty sustainable range.
Reliance Worldwide's Dividend Has Lacked Consistency
It's comforting to see that Reliance Worldwide has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. The annual payment during the last 6 years was $0.0441 in 2017, and the most recent fiscal year payment was $0.095. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. Reliance Worldwide has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Reliance Worldwide has grown earnings per share at 14% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.
We Really Like Reliance Worldwide's Dividend
Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Reliance Worldwide that investors need to be conscious of moving forward. Is Reliance Worldwide not quite the opportunity you were looking for? Why not check out our selection of top 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.
