Stock Analysis

Sturm Ruger (NYSE:RGR) Is Increasing Its Dividend To US$0.86

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NYSE:RGR
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Sturm, Ruger & Company, Inc. (NYSE:RGR) has announced that it will be increasing its dividend on the 25th of March to US$0.86. This takes the dividend yield from 5.0% to 5.0%, which shareholders will be pleased with.

See our latest analysis for Sturm Ruger

Sturm Ruger's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, prior to this announcement, Sturm Ruger's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS could expand by 13.9% if recent trends continue. If the dividend continues on this path, the payout ratio could be 39% by next year, which we think can be pretty sustainable going forward.

historic-dividend
NYSE:RGR Historic Dividend February 27th 2022

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from US$0.59 in 2012 to the most recent annual payment of US$3.51. This means that it has been growing its distributions at 19% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Sturm Ruger has impressed us by growing EPS at 14% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like Sturm Ruger's Dividend

Overall, a dividend increase is always good, and we think that Sturm Ruger is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Sturm Ruger that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

What are the risks and opportunities for Sturm Ruger?

Sturm, Ruger & Company, Inc., together with its subsidiaries, designs, manufactures, and sells firearms under the Ruger name and trademark in the United States.

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Rewards

  • Price-To-Earnings ratio (9.2x) is below the US market (15.1x)

Risks

No risks detected for RGR from our risks checks.

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