Is It Smart To Buy Raymond James Financial, Inc. (NYSE:RJF) Before It Goes Ex-Dividend?

By
Simply Wall St
Published
March 26, 2021
NYSE:RJF

Readers hoping to buy Raymond James Financial, Inc. (NYSE:RJF) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. This means that investors who purchase shares on or after the 31st of March will not receive the dividend, which will be paid on the 15th of April.

Raymond James Financial's next dividend payment will be US$0.39 per share. Last year, in total, the company distributed US$1.56 to shareholders. Last year's total dividend payments show that Raymond James Financial has a trailing yield of 1.3% on the current share price of $121.24. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Raymond James Financial

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Raymond James Financial paid out just 24% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

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

historic-dividend
NYSE:RJF Historic Dividend March 26th 2021

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Raymond James Financial's earnings per share have risen 12% per annum over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Raymond James Financial has delivered an average of 13% per year annual increase in its dividend, based on the past 10 years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

Should investors buy Raymond James 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. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. Overall, Raymond James Financial looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

In light of that, while Raymond James Financial has an appealing dividend, it's worth knowing the risks involved with this stock. In terms of investment risks, we've identified 2 warning signs with Raymond James Financial and understanding them should be part of your investment process.

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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