Resources Connection (NASDAQ:RGP) Is Paying Out A Dividend Of $0.14

The board of Resources Connection, Inc. (NASDAQ:RGP) has announced that it will pay a dividend of $0.14 per share on the 21st of September. The dividend yield will be 2.7% based on this payment which is still above the industry average.

View our latest analysis for Resources Connection

Resources Connection's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, prior to this announcement, Resources Connection's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to fall by 4.3%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 31%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Resources Connection Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2012, the dividend has gone from $0.20 total annually to $0.56. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Resources Connection has grown earnings per share at 29% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like Resources Connection's Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Resources Connection that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield 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.