Be Sure To Check Out RPC, Inc. (NYSE:RES) Before It Goes Ex-Dividend
Readers hoping to buy RPC, Inc. (NYSE:RES) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase RPC's shares before the 9th of November to receive the dividend, which will be paid on the 11th of December.
The company's next dividend payment will be US$0.04 per share, and in the last 12 months, the company paid a total of US$0.16 per share. Looking at the last 12 months of distributions, RPC has a trailing yield of approximately 2.0% on its current stock price of $8.2. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether RPC has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for RPC
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. RPC has a low and conservative payout ratio of just 13% of its income after tax. A useful secondary check can be to evaluate whether RPC generated enough free cash flow to afford its dividend. Luckily it paid out just 12% of its free cash flow last year.
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?
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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see RPC earnings per share are up 8.4% per annum over the last five years. Earnings per share have been growing at a decent rate, and the company is retaining more than three-quarters of its earnings in the business. This is an attractive combination, because when profits are reinvested effectively, growth can compound, with corresponding benefits for earnings and dividends in the future.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. RPC's dividend payments per share have declined at 6.7% per year on average over the past 10 years, which is uninspiring. RPC is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.
The Bottom Line
Has RPC got what it takes to maintain its dividend payments? Earnings per share have been growing moderately, and RPC is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and RPC is halfway there. RPC looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
On that note, you'll want to research what risks RPC is facing. In terms of investment risks, we've identified 1 warning sign with RPC and understanding them should be part of your investment process.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are 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.
