- Oops!Something went wrong.Please try again later.
Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Historically, RF Industries, Ltd. (NASDAQ:RFIL) has been paying a dividend to shareholders. Today it yields 1.1%. Does RF Industries tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
5 questions I ask before picking a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
Is it paying an annual yield above 75% of dividend payers?
Has it paid dividend every year without dramatically reducing payout in the past?
Has it increased its dividend per share amount over the past?
Can it afford to pay the current rate of dividends from its earnings?
Will it have the ability to keep paying its dividends going forward?
How well does RF Industries fit our criteria?
The company currently pays out 12% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. The reality is that it is too early to consider RF Industries as a dividend investment. It has only been consistently paying dividends for 9 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
In terms of its peers, RF Industries generates a yield of 1.1%, which is on the low-side for Electronic stocks.
After digging a little deeper into RF Industries’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three fundamental factors you should further examine:
Future Outlook: What are well-informed industry analysts predicting for RFIL’s future growth? Take a look at our free research report of analyst consensus for RFIL’s outlook.
Valuation: What is RFIL 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 RFIL is currently mispriced by the market.
Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.