RS Group (LON:RS1) Has Affirmed Its Dividend Of £0.137

RS Group plc's (LON:RS1) investors are due to receive a payment of £0.137 per share on 19th of July. This means the annual payment is 3.1% of the current stock price, which is above the average for the industry.

Check out our latest analysis for RS Group

RS Group's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, RS Group's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share is forecast to rise by 46.3% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 41% by next year, which is in a pretty sustainable range.

RS Group Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the annual payment back then was £0.118, compared to the most recent full-year payment of £0.22. This implies that the company grew its distributions at a yearly rate of about 6.5% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

RS Group May Find It Hard To Grow The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings per share has been crawling upwards at 3.0% per year. The company has been growing at a pretty soft 3.0% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

We Really Like RS Group's Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. Taking the debate a bit further, we've identified 1 warning sign for RS Group that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield 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.