Rocky Brands' (NASDAQ:RCKY) Upcoming Dividend Will Be Larger Than Last Year's

Rocky Brands, Inc.'s (NASDAQ:RCKY) dividend will be increasing to US$0.15 on 16th of December. This will take the annual payment to 1.5% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Rocky Brands

Rocky Brands' Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Rocky Brands' earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, earnings per share could rise by 35.7% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 19% by next year, which is in a pretty sustainable range.

Rocky Brands Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The dividend has gone from US$0.40 in 2012 to the most recent annual payment of US$0.62. This implies that the company grew its distributions at a yearly rate of about 5.0% over that duration. Rocky Brands hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Rocky Brands has seen EPS rising for the last five years, at 36% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Our Thoughts On Rocky Brands' Dividend

In summary, while it's always good to see the dividend being raised, we don't think Rocky Brands' payments are rock solid. While Rocky Brands is earning enough to cover the payments, the cash flows are lacking. We don't think Rocky Brands is a great stock to add to your portfolio if income is your focus.

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. Case in point: We've spotted 5 warning signs for Rocky Brands (of which 1 makes us a bit uncomfortable!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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.

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