There's A Lot To Like About Range Resources' (NYSE:RRC) Upcoming US$0.09 Dividend

Readers hoping to buy Range Resources Corporation (NYSE:RRC) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is one business day before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves a full business day. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Range Resources' shares on or after the 12th of September, you won't be eligible to receive the dividend, when it is paid on the 26th of September.

The company's next dividend payment will be US$0.09 per share. Last year, in total, the company distributed US$0.36 to shareholders. Calculating the last year's worth of payments shows that Range Resources has a trailing yield of 1.0% on the current share price of US$34.70. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

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Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Range Resources paid out just 17% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out 16% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Range Resources'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.

Check out our latest analysis for Range Resources

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

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 Range Resources's earnings have been skyrocketing, up 50% per annum for the past five years. Range Resources looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Range Resources has delivered an average of 8.4% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Should investors buy Range Resources for the upcoming dividend? It's great that Range Resources is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Range Resources looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

Curious what other investors think of Range Resources? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

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.