Rush Enterprises (NASDAQ:RUSH.B) Is Paying Out A Larger Dividend Than Last Year
Rush Enterprises, Inc. (NASDAQ:RUSH.B) has announced that it will be increasing its dividend from last year's comparable payment on the 12th of September to $0.21. Despite this raise, the dividend yield of 1.5% is only a modest boost to shareholder returns.
View our latest analysis for Rush Enterprises
Rush Enterprises' Dividend Is Well Covered By Earnings
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, Rush Enterprises was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
If the trend of the last few years continues, EPS will grow by 41.8% over the next 12 months. If the dividend continues on this path, the payout ratio could be 12% by next year, which we think can be pretty sustainable going forward.
Rush Enterprises Is Still Building Its Track Record
The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 4 years, which isn't that long in the grand scheme of things. Since 2018, the dividend has gone from $0.32 total annually to $0.84. This implies that the company grew its distributions at a yearly rate of about 27% over that duration. Rush Enterprises has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Rush Enterprises has impressed us by growing EPS at 42% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.
Rush Enterprises Looks Like A Great Dividend Stock
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Rush Enterprises has 3 warning signs (and 1 which shouldn't be ignored) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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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