RGC Resources (NASDAQ:RGCO) Has Announced A Dividend Of $0.2075

RGC Resources, Inc.'s (NASDAQ:RGCO) investors are due to receive a payment of $0.2075 per share on 1st of May. This payment means that the dividend yield will be 3.9%, which is around the industry average.

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RGC Resources' Payment Could Potentially Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, RGC Resources' earnings easily covered the dividend, but free cash flows were negative. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Unless the company can turn things around, EPS could fall by 1.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 75%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

View our latest analysis for RGC Resources

RGC Resources Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the dividend has gone from $0.493 total annually to $0.83. This implies that the company grew its distributions at a yearly rate of about 5.3% over that duration. 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 May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Although it's important to note that RGC Resources' earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

Our Thoughts On RGC Resources' Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While RGC Resources is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

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. Case in point: We've spotted 3 warning signs for RGC Resources (of which 2 shouldn't be ignored!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.