There's A Lot To Like About Rush Enterprises' (NASDAQ:RUSH.B) Upcoming US$0.21 Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Rush Enterprises, Inc. (NASDAQ:RUSH.B) is about to trade ex-dividend in the next 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled 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. This means that investors who purchase Rush Enterprises' shares on or after the 9th of November will not receive the dividend, which will be paid on the 9th of December.
The company's next dividend payment will be US$0.21 per share, on the back of last year when the company paid a total of US$0.84 to shareholders. Based on the last year's worth of payments, Rush Enterprises stock has a trailing yield of around 1.6% on the current share price of $52.11. If you buy this business for its dividend, you should have an idea of whether Rush Enterprises's dividend is reliable and sustainable. So we need to investigate whether Rush Enterprises can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Rush Enterprises
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. Rush Enterprises has a low and conservative payout ratio of just 12% of its income after tax. 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. It paid out 78% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Rush Enterprises's earnings have been skyrocketing, up 58% per annum for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last four years, Rush Enterprises has lifted its dividend by approximately 27% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
To Sum It Up
Should investors buy Rush Enterprises for the upcoming dividend? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. Rush Enterprises looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
In light of that, while Rush Enterprises has an appealing dividend, it's worth knowing the risks involved with this stock. For example, Rush Enterprises has 3 warning signs (and 2 which are a bit concerning) we think you should know about.
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.
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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