Richelieu Hardware (TSE:RCH) Has Affirmed Its Dividend Of CA$0.15

Richelieu Hardware Ltd.'s (TSE:RCH) investors are due to receive a payment of CA$0.15 per share on 8th of August. This payment means the dividend yield will be 1.5%, which is below the average for the industry.

View our latest analysis for Richelieu Hardware

Richelieu Hardware's Earnings Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, Richelieu Hardware's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 6.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 36%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of CA$0.173 in 2014 to the most recent total annual payment of CA$0.60. This means that it has been growing its distributions at 13% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Richelieu Hardware Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Richelieu Hardware has grown earnings per share at 8.6% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Richelieu Hardware's prospects of growing its dividend payments in the future.

Richelieu Hardware Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Richelieu Hardware that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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