Why You Might Be Interested In Richards Packaging Income Fund (TSE:RPI.UN) For Its Upcoming Dividend

It looks like Richards Packaging Income Fund (TSE:RPI.UN) is about to go ex-dividend in the next four days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Richards Packaging Income Fund's shares on or after the 31st of December, you won't be eligible to receive the dividend, when it is paid on the 14th of January.

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 5.7% on the current share price of CA$29.72. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. 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.

View our latest analysis for Richards Packaging Income Fund

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. That's why it's good to see Richards Packaging Income Fund paying out a modest 39% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It distributed 26% of its free cash flow as dividends, a comfortable payout level for most companies.

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?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Richards Packaging Income Fund, with earnings per share up 9.0% on average 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.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Richards Packaging Income Fund has lifted its dividend by approximately 7.9% 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.

The Bottom Line

Is Richards Packaging Income Fund worth buying for its dividend? 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. Richards Packaging Income Fund looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

Want to learn more about Richards Packaging Income Fund? Here's a visualisation of its historical rate of 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.