Stock Analysis

Regis Resources' (ASX:RRL) Dividend Will Be Reduced To AU$0.03

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Regis Resources Limited (ASX:RRL) is reducing its dividend to AU$0.03 on the 28th of September. This means that the annual payment is 2.9% of the current stock price, which is lower than what the rest of the industry is paying.

Check out our latest analysis for Regis Resources

Regis Resources' Payment Has Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, Regis Resources' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to fall by 27.6%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 27%, which we are pretty comfortable with and we think is feasible on an earnings basis.

ASX:RRL Historic Dividend September 2nd 2021

Regis Resources' Dividend Has Lacked Consistency

Looking back, Regis Resources' dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. The dividend has gone from AU$0.15 in 2013 to the most recent annual payment of AU$0.06. This works out to a decline of approximately 60% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Regis Resources has seen EPS rising for the last five years, at 17% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We'd also point out that Regis Resources has issued stock equal to 48% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Regis Resources Looks Like A Great Dividend Stock

Overall, we think that Regis Resources could be a great option for a dividend investment, although we would have preferred if the dividend wasn't cut this year. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Regis Resources that you should be aware of before investing. We have also put together a list of global stocks with a solid dividend.

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