Should You Buy Ramsdens Holdings PLC (LON:RFX) For Its Upcoming Dividend?

Ramsdens Holdings PLC (LON:RFX) stock is about to trade ex-dividend in 3 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 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 Ramsdens Holdings' shares on or after the 15th of February, you won't be eligible to receive the dividend, when it is paid on the 22nd of March.

The company's upcoming dividend is UK£0.071 a share, following on from the last 12 months, when the company distributed a total of UK£0.10 per share to shareholders. Looking at the last 12 months of distributions, Ramsdens Holdings has a trailing yield of approximately 5.3% on its current stock price of UK£1.945. 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 Ramsdens Holdings has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Ramsdens Holdings

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. Ramsdens Holdings paid out a comfortable 42% of its profit last year.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Click here to see how much of its profit Ramsdens Holdings 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 Ramsdens Holdings, with earnings per share up 9.0% on average over the last five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last seven years, Ramsdens Holdings has lifted its dividend by approximately 22% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Should investors buy Ramsdens Holdings for the upcoming dividend? Ramsdens Holdings has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. In summary, Ramsdens Holdings appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

So while Ramsdens Holdings looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Case in point: We've spotted 2 warning signs for Ramsdens Holdings you should be aware of.

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.