- Oops!Something went wrong.Please try again later.
Ritchie Bros. Auctioneers Incorporated (NYSE:RBA) stock is about to trade ex-dividend in three days. You will need to purchase shares before the 11th of February to receive the dividend, which will be paid on the 5th of March.
Ritchie Bros. Auctioneers's upcoming dividend is US$0.22 a share, following on from the last 12 months, when the company distributed a total of US$0.88 per share to shareholders. Based on the last year's worth of payments, Ritchie Bros. Auctioneers has a trailing yield of 1.5% on the current stock price of $59.01. 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.
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. Ritchie Bros. Auctioneers is paying out an acceptable 53% of its profit, a common payout level among most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 37% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that Ritchie Bros. Auctioneers's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
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 earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Ritchie Bros. Auctioneers's earnings per share have been growing at 13% a year for the past five years. Ritchie Bros. Auctioneers is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Ritchie Bros. Auctioneers has delivered 8.2% 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
Is Ritchie Bros. Auctioneers worth buying for its dividend? Ritchie Bros. Auctioneers's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. It's a promising combination that should mark this company worthy of closer attention.
While it's tempting to invest in Ritchie Bros. Auctioneers for the dividends alone, you should always be mindful of the risks involved. For example - Ritchie Bros. Auctioneers has 3 warning signs we think you should be aware of.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.