Be Sure To Check Out Rocky Brands, Inc. (NASDAQ:RCKY) Before It Goes Ex-Dividend

Rocky Brands, Inc. (NASDAQ:RCKY) is about to trade ex-dividend in the next three days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase Rocky Brands' shares on or after the 30th of November will not receive the dividend, which will be paid on the 15th of December.

The company's next dividend payment will be US$0.15 per share, on the back of last year when the company paid a total of US$0.62 to shareholders. Last year's total dividend payments show that Rocky Brands has a trailing yield of 2.3% on the current share price of $26.57. If you buy this business for its dividend, you should have an idea of whether Rocky Brands's dividend is reliable and sustainable. So we need to investigate whether Rocky Brands can afford its dividend, and if the dividend could grow.

See our latest analysis for Rocky Brands

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Rocky Brands paid out a comfortable 45% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. What's good is that dividends were well covered by free cash flow, with the company paying out 8.2% of its cash flow last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's not encouraging to see that Rocky Brands's earnings are effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share. Earnings per share growth in recent times has not been a standout. Yet there are several ways to grow the dividend, and one of them is simply that the company may choose to pay out more of its earnings as dividends.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Rocky Brands has delivered 4.5% dividend growth per year on average over the past 10 years.

To Sum It Up

Is Rocky Brands an attractive dividend stock, or better left on the shelf? Earnings per share have been flat over this time, but we're intrigued to see that Rocky Brands is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine strong earnings per share growth with a low payout ratio, and Rocky Brands is halfway there. It's a promising combination that should mark this company worthy of closer attention.

While it's tempting to invest in Rocky Brands for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 4 warning signs for Rocky Brands (of which 2 are potentially serious!) you should know about.

A common investing mistake is buying the first interesting stock you see. Here you can find a full 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.