Record (LON:REC) Is Paying Out A Dividend Of £0.0305

The board of Record plc (LON:REC) has announced that it will pay a dividend on the 2nd of August, with investors receiving £0.0305 per share. This makes the dividend yield 8.1%, which will augment investor returns quite nicely.

View our latest analysis for Record

Record Doesn't Earn Enough To Cover Its Payments

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, the company's dividend was higher than its profits, and made up 79% of cash flows. This indicates that the company could be more focused on returning cash to shareholders than reinvesting to grow the business.

EPS is set to grow by 8.1% over the next year if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could reach 110%, which probably can't continue without starting to put some pressure on the balance sheet.

Record Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of £0.015 in 2014 to the most recent total annual payment of £0.052. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

There Isn't Much Room To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. Record has seen EPS rising for the last five years, at 8.1% per annum. However, the company isn't reinvesting a lot back into the business, so we would expect the growth rate to slow down somewhat in the future.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Record's payments, as there could be some issues with sustaining them into the future. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. For example, we've picked out 1 warning sign for Record that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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