Here's What We Like About Richards Packaging Income Fund's (TSE:RPI.UN) Upcoming Dividend

It looks like Richards Packaging Income Fund (TSE:RPI.UN) is about to go ex-dividend in the next three days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Richards Packaging Income Fund's shares on or after the 31st of July, you won't be eligible to receive the dividend, when it is paid on the 14th of August.

The company's upcoming dividend is CA$0.11 a share, following on from the last 12 months, when the company distributed a total of CA$1.68 per share to shareholders. Calculating the last year's worth of payments shows that Richards Packaging Income Fund has a trailing yield of 4.1% on the current share price of CA$32.00. If you buy this business for its dividend, you should have an idea of whether Richards Packaging Income Fund's dividend is reliable and sustainable. As a result, readers should always check whether Richards Packaging Income Fund has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Richards Packaging Income Fund

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. That's why it's good to see Richards Packaging Income Fund paying out a modest 38% of its earnings. A useful secondary check can be to evaluate whether Richards Packaging Income Fund generated enough free cash flow to afford its dividend. The good news is it paid out just 20% of its free cash flow in the last year.

It's positive to see that Richards Packaging Income Fund'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.

Click here to see how much of its profit Richards Packaging Income Fund paid out over the last 12 months.

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. This is why it's a relief to see Richards Packaging Income Fund earnings per share are up 9.2% per annum over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Richards Packaging Income Fund has lifted its dividend by approximately 5.3% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

From a dividend perspective, should investors buy or avoid Richards Packaging Income Fund? Earnings per share have been growing moderately, and Richards Packaging Income Fund is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Richards Packaging Income Fund is being conservative with its dividend payouts and could still perform reasonably over the long run. There's a lot to like about Richards Packaging Income Fund, and we would prioritise taking a closer look at it.

Curious about whether Richards Packaging Income Fund has been able to consistently generate growth? Here's a chart of its historical revenue and earnings growth.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com