RE/MAX Holdings' (NYSE:RMAX) Dividend Will Be $0.23

The board of RE/MAX Holdings, Inc. (NYSE:RMAX) has announced that it will pay a dividend of $0.23 per share on the 30th of August. Based on this payment, the dividend yield on the company's stock will be 3.4%, which is an attractive boost to shareholder returns.

Check out our latest analysis for RE/MAX Holdings

RE/MAX Holdings Is Paying Out More Than It Is Earning

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Despite not being profitable, RE/MAX Holdings is paying out most of its free cash flow as a dividend. Generally paying a dividend without making profits isn't a great idea and we are also worried that there is limited reinvestment into the business.

Earnings per share is forecast to rise by 173.3% over the next year. If the dividend continues on its recent course, the payout ratio in 12 months could be 174%, which is a bit high and could start applying pressure to the balance sheet.

RE/MAX Holdings Doesn't Have A Long Payment History

RE/MAX Holdings' dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The dividend has gone from an annual total of $0.25 in 2014 to the most recent total annual payment of $0.92. This implies that the company grew its distributions at a yearly rate of about 18% over that duration. RE/MAX Holdings has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

Dividend Growth Potential Is Shaky

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. RE/MAX Holdings' earnings per share has shrunk at 36% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

RE/MAX Holdings' Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about RE/MAX Holdings' payments, as there could be some issues with sustaining them into the future. The payments are bit high to be considered sustainable, and the track record isn't the best. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for RE/MAX Holdings you should be aware of, and 1 of them is potentially serious. Is RE/MAX Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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