Ramsdens Holdings' (LON:RFX) Dividend Will Be £0.036

Ramsdens Holdings PLC (LON:RFX) will pay a dividend of £0.036 on the 7th of October. Although the dividend is now higher, the yield is only 5.5%, which is below the industry average.

See our latest analysis for Ramsdens Holdings

Ramsdens Holdings' Payment Has Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. The last dividend was quite comfortably covered by Ramsdens Holdings' earnings, but it was a bit tighter on the cash flow front. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.

If the trend of the last few years continues, EPS will grow by 7.8% over the next 12 months. If the dividend continues on this path, the payout ratio could be 46% by next year, which we think can be pretty sustainable going forward.

Ramsdens Holdings' Dividend Has Lacked Consistency

It's comforting to see that Ramsdens Holdings has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. Since 2017, the dividend has gone from £0.026 total annually to £0.107. This works out to be a compound annual growth rate (CAGR) of approximately 22% a year over that time. Ramsdens Holdings 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.

Ramsdens Holdings Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Ramsdens Holdings has impressed us by growing EPS at 7.8% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

Our Thoughts On Ramsdens Holdings' Dividend

Overall, we always like to see the dividend being raised, but we don't think Ramsdens Holdings will make a great income stock. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 2 warning signs for Ramsdens Holdings 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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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.

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