Racing Force (BIT:RFG) Is Paying Out A Dividend Of €0.09

The board of Racing Force S.P.A. (BIT:RFG) has announced that it will pay a dividend on the 14th of May, with investors receiving €0.09 per share. Based on this payment, the dividend yield will be 2.2%, which is fairly typical for the industry.

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Racing Force's Payment Could Potentially Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, Racing Force's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Looking forward, earnings per share is forecast to rise by 17.1% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 36% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Racing Force

Racing Force Doesn't Have A Long Payment History

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 3 years, which isn't that long in the grand scheme of things. The annual payment during the last 3 years was €0.07 in 2022, and the most recent fiscal year payment was €0.09. This works out to be a compound annual growth rate (CAGR) of approximately 8.7% a year over that time. The dividend has been growing as a reasonable rate, which we like. However, investors will probably want to see a longer track record before they consider Racing Force to be a consistent dividend paying stock.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Earnings have grown by 14% in the last year. We always like to see growing earnings, and if the trend continues it would be a very positive sign for the dividend potential. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend. We do note though, one year is too short a time to be drawing strong conclusions about a company's future prospects.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Racing Force's payments, as there could be some issues with sustaining them into the future. While Racing Force is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Racing Force that you should be aware of before investing. Is Racing Force not quite the opportunity you were looking for? Why not check out 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.