Attention dividend hunters! Renasant Corporation (NASDAQ:RNST) will be distributing its dividend of US$0.20 per share on the 28 September 2018, and will start trading ex-dividend in 2 days time on the 13 September 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine Renasant’s latest financial data to analyse its dividend characteristics.
5 questions to ask before buying a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has it increased its dividend per share amount over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Will the company be able to keep paying dividend based on the future earnings growth?
How does Renasant fare?
The company currently pays out 33.1% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect RNST’s payout to fall to 24.1% of its earnings, which leads to a dividend yield of around 1.8%. However, EPS should increase to $3.06, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. RNST has increased its DPS from $0.68 to $0.80 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes RNST a true dividend rockstar.
In terms of its peers, Renasant has a yield of 1.7%, which is on the low-side for Banks stocks.
Keeping in mind the dividend characteristics above, Renasant is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three relevant factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for RNST’s future growth? Take a look at our free research report of analyst consensus for RNST’s outlook.
- Valuation: What is RNST worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether RNST is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.