Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see B. Riley Financial, Inc. (NASDAQ:RILY) is about to trade ex-dividend in the next 4 days. If you purchase the stock on or after the 9th of March, you won't be eligible to receive this dividend, when it is paid on the 24th of March.
B. Riley Financial's next dividend payment will be US$3.50 per share, and in the last 12 months, the company paid a total of US$5.00 per share. Looking at the last 12 months of distributions, B. Riley Financial has a trailing yield of approximately 7.6% on its current stock price of $66.01. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. B. Riley Financial paid out just 15% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see B. Riley Financial's earnings have been skyrocketing, up 61% per annum for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. B. Riley Financial has delivered an average of 86% per year annual increase in its dividend, based on the past six years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
To Sum It Up
Should investors buy B. Riley Financial for the upcoming dividend? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Overall, B. Riley Financial looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
So while B. Riley Financial looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, we've found 4 warning signs for B. Riley Financial (2 are significant!) that deserve your attention before investing in the shares.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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This article by Simply Wall St is general in nature. 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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