Richardson Electronics (NASDAQ:RELL) Has Announced A Dividend Of $0.06
Richardson Electronics, Ltd. (NASDAQ:RELL) will pay a dividend of $0.06 on the 24th of May. This means that the annual payment will be 1.3% of the current stock price, which is in line with the average for the industry.
View our latest analysis for Richardson Electronics
Richardson Electronics' Earnings Easily Cover The Distributions
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Richardson Electronics' earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.
Looking forward, earnings per share is forecast to fall by 2.3% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 13%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
Richardson Electronics Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2013, the annual payment back then was $0.20, compared to the most recent full-year payment of $0.24. This works out to be a compound annual growth rate (CAGR) of approximately 1.8% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Richardson Electronics has grown earnings per share at 121% per 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.
Our Thoughts On Richardson Electronics' Dividend
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Richardson Electronics' payments, as there could be some issues with sustaining them into the future. While Richardson Electronics is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for Richardson Electronics (2 can't be ignored!) that you should be aware of before investing. Is Richardson Electronics 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.
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