The board of RE/MAX Holdings, Inc. (NYSE:RMAX) has announced that it will pay a dividend of US$0.23 per share on the 25th of May. This makes the dividend yield 3.9%, which will augment investor returns quite nicely.
RE/MAX Holdings Might Find It Hard To Continue The Dividend
If the payments aren't sustainable, a high yield for a few years won't matter that much. RE/MAX Holdings is unprofitable despite paying a dividend, and it is paying out 124% of its free cash flow. This makes us feel that the dividend will be hard to maintain.
Recent, EPS has fallen by 30.4%, so this could continue over the next year. This will push the company into unprofitability, which means the managers will have to choose between suspending the dividend, or paying it out of cash reserves.
RE/MAX Holdings Is Still Building Its Track Record
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. Since 2014, the first annual payment was US$0.25, compared to the most recent full-year payment of US$0.92. This means that it has been growing its distributions at 18% per annum over that time. 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.
The Dividend Has Limited Growth Potential
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. RE/MAX Holdings' earnings per share has shrunk at 30% 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.
RE/MAX Holdings' Dividend Doesn't Look Great
Overall, while some might be pleased that the dividend wasn't cut, we think this may help RE/MAX Holdings make more consistent payments in the future. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Overall, this doesn't get us very excited from an income standpoint.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 3 warning signs for RE/MAX Holdings (2 make us uncomfortable!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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