Sturm, Ruger & Company, Inc. (NYSE:RGR) Is About To Go Ex-Dividend, And It Pays A 6.6% Yield
Sturm, Ruger & Company, Inc. (NYSE:RGR) stock is about to trade ex-dividend in 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Sturm Ruger's shares on or after the 15th of November, you won't be eligible to receive the dividend, when it is paid on the 30th of November.
The company's next dividend payment will be US$0.41 per share, on the back of last year when the company paid a total of US$3.51 to shareholders. Last year's total dividend payments show that Sturm Ruger has a trailing yield of 6.6% on the current share price of $52.84. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Check out our latest analysis for Sturm Ruger
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Sturm Ruger paying out a modest 40% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Dividends consumed 66% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Sturm Ruger, with earnings per share up 5.7% on average over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Sturm Ruger has delivered 19% dividend growth per year on average over the past 10 years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
The Bottom Line
Should investors buy Sturm Ruger for the upcoming dividend? Earnings per share have been growing at a steady rate, and Sturm Ruger paid out less than half its profits and more than half its free cash flow as dividends over the last year. Overall, it's hard to get excited about Sturm Ruger from a dividend perspective.
While it's tempting to invest in Sturm Ruger for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 1 warning sign for Sturm Ruger you should know about.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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