RGC Resources' (NASDAQ:RGCO) Dividend Will Be $0.2075

The board of RGC Resources, Inc. (NASDAQ:RGCO) has announced that it will pay a dividend on the 1st of August, with investors receiving $0.2075 per share. This means the dividend yield will be fairly typical at 3.8%.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

RGC Resources' Payment Could Potentially Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, RGC Resources' earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Looking forward, could fall by 1.8% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we think the payout ratio could reach 76%, which is definitely on the higher side.

View our latest analysis for RGC Resources

RGC Resources Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the dividend has gone from $0.493 total annually to $0.83. This means that it has been growing its distributions at 5.3% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

RGC Resources May Find It Hard To Grow The Dividend

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. However, RGC Resources' EPS was effectively flat over the past five years, which could stop the company from paying more every year.

Our Thoughts On RGC Resources' Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 3 warning signs for RGC Resources you should be aware of, and 2 of them are a bit concerning. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.