Readers hoping to buy Rollins, Inc. (NYSE:ROL) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. If you purchase the stock on or after the 7th of February, you won't be eligible to receive this dividend, when it is paid on the 10th of March.
Rollins's upcoming dividend is US$0.12 a share, following on from the last 12 months, when the company distributed a total of US$0.53 per share to shareholders. Based on the last year's worth of payments, Rollins stock has a trailing yield of around 1.4% on the current share price of $37.95. If you buy this business for its dividend, you should have an idea of whether Rollins's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Rollins is paying out an acceptable 68% of its profit, a common payout level among most companies.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Rollins earnings per share are up 8.2% per annum over the last five years. Decent historical earnings per share growth suggests Rollins has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, ten years ago, Rollins has lifted its dividend by approximately 20% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
From a dividend perspective, should investors buy or avoid Rollins? Earnings per share have been growing at a reasonable rate, and the company is paying out a bit over half its earnings as dividends. Rollins ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
Ever wonder what the future holds for Rollins? See what the five analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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