RGC Resources (NASDAQ:RGCO) Has Announced A Dividend Of $0.1975

RGC Resources, Inc. (NASDAQ:RGCO) has announced that it will pay a dividend of $0.1975 per share on the 1st of May. Based on this payment, the dividend yield will be 3.4%, which is fairly typical for the industry.

View our latest analysis for RGC Resources

RGC Resources' Distributions May Be Difficult To Sustain

Solid dividend yields are great, but they only really help us if the payment is sustainable. Despite not generating a profit, RGC Resources is still paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.

Over the next year, EPS might fall by 45.3% based on recent performance. This means the company won't be turning a profit, which could place managers in the tough spot of having to choose between suspending the dividend or putting more pressure on the balance sheet.

RGC Resources Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.467 in 2013 to the most recent total annual payment of $0.79. This works out to be a compound annual growth rate (CAGR) of approximately 5.4% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though RGC Resources' EPS has declined at around 45% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about RGC Resources' payments, as there could be some issues with sustaining them into the future. Although they have been consistent in the past, we think the payments are a little high to be sustained. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 3 warning signs for RGC Resources that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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