Sturm, Ruger & Company, Inc. (NYSE:RGR) Goes Ex-Dividend Soon

Sturm, Ruger & Company, Inc. (NYSE:RGR) stock is about to trade ex-dividend in 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Sturm Ruger's shares on or after the 14th of March, you won't be eligible to receive the dividend, when it is paid on the 28th of March.

The company's upcoming dividend is US$0.24 a share, following on from the last 12 months, when the company distributed a total of US$0.70 per share to shareholders. Based on the last year's worth of payments, Sturm Ruger stock has a trailing yield of around 1.8% on the current share price of US$39.62. If you buy this business for its dividend, you should have an idea of whether Sturm Ruger's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Sturm Ruger

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Sturm Ruger's payout ratio is modest, at just 39% of profit. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Fortunately, it paid out only 34% of its free cash flow in the past year.

It's positive to see that Sturm Ruger's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see how much of its profit Sturm Ruger paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That explains why we're not overly excited about Sturm Ruger's flat earnings 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.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Sturm Ruger has seen its dividend decline 5.6% per annum on average over the past 10 years, which is not great to see.

Final Takeaway

Is Sturm Ruger worth buying for its dividend? Earnings per share have been flat, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend gets cut. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

On that note, you'll want to research what risks Sturm Ruger is facing. For instance, we've identified 3 warning signs for Sturm Ruger (1 is significant) you should be aware of.

If you're in the market for strong dividend payers, we recommend checking 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.