Ramsdens Holdings' (LON:RFX) Upcoming Dividend Will Be Larger Than Last Year's

Ramsdens Holdings PLC's (LON:RFX) periodic dividend will be increasing on the 22nd of March to £0.071, with investors receiving 13% more than last year's £0.063. Despite this raise, the dividend yield of 5.0% is only a modest boost to shareholder returns.

Check out our latest analysis for Ramsdens Holdings

Ramsdens Holdings' Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. The last payment was quite easily covered by earnings, but it made up 565% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Over the next year, EPS could expand by 9.0% if recent trends continue. If the dividend continues on this path, the payout ratio could be 43% by next year, which we think can be pretty sustainable going forward.

Ramsdens Holdings' Dividend Has Lacked Consistency

Looking back, Ramsdens Holdings' dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2017, the annual payment back then was £0.026, compared to the most recent full-year payment of £0.104. This means that it has been growing its distributions at 22% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Has Growth Potential

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 9.0% per year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

Our Thoughts On Ramsdens Holdings' Dividend

In summary, while it's always good to see the dividend being raised, we don't think Ramsdens Holdings' payments are rock solid. While Ramsdens Holdings is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Ramsdens Holdings that investors should take into consideration. 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.