Richelieu Hardware (TSE:RCH) Is Paying Out A Dividend Of CA$0.1533

The board of Richelieu Hardware Ltd. (TSE:RCH) has announced that it will pay a dividend on the 8th of May, with investors receiving CA$0.1533 per share. This means that the annual payment will be 1.9% of the current stock price, which is in line with the average for the industry.

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Richelieu Hardware's Projected Earnings Seem Likely To Cover Future Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. However, prior to this announcement, Richelieu Hardware's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS could expand by 4.9% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 43% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Richelieu Hardware

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the dividend has gone from CA$0.187 total annually to CA$0.613. This means that it has been growing its distributions at 13% per annum over that time. Richelieu Hardware has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend's Growth Prospects Are Limited

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. However, Richelieu Hardware has only grown its earnings per share at 4.9% per annum over the past five years. If Richelieu Hardware is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

In Summary

Overall, a consistent dividend is a good thing, and we think that Richelieu Hardware has the ability to continue this into the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in Richelieu Hardware stock. Looking for more high-yielding dividend ideas? Try our collection 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.