Resimac Group's (ASX:RMC) Upcoming Dividend Will Be Larger Than Last Year's

Resimac Group Limited (ASX:RMC) has announced that it will be increasing its dividend on the 21st of September to AU$0.04, which will be 122% higher than last year. This takes the dividend yield from 3.2% to 4.2%, which shareholders will be pleased with.

Check out our latest analysis for Resimac Group

Resimac Group's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Resimac Group is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

The next year is set to see EPS grow by 11.5%. If the dividend continues on this path, the payout ratio could be 46% by next year, which we think can be pretty sustainable going forward.

Resimac Group Is Still Building Its Track Record

Resimac Group's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The first annual payment during the last 5 years was AU$0.015 in 2016, and the most recent fiscal year payment was AU$0.08. This means that it has been growing its distributions at 40% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Resimac Group has grown earnings per share at 42% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Resimac Group is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for Resimac Group that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our curated list of 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.
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