Remgro (JSE:REM) Could Be A Buy For Its Upcoming Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Remgro Limited (JSE:REM) is about to go ex-dividend in just three days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. In other words, investors can purchase Remgro's shares before the 22nd of October in order to be eligible for the dividend, which will be paid on the 27th of October.

The company's next dividend payment will be R04.48 per share, and in the last 12 months, the company paid a total of R3.44 per share. Looking at the last 12 months of distributions, Remgro has a trailing yield of approximately 2.0% on its current stock price of R0171.02. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

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.

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Remgro is paying out an acceptable 58% of its profit, a common payout level among most companies.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

See our latest analysis for Remgro

Click here to see how much of its profit Remgro paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Remgro's earnings per share have been growing at 13% a year for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Remgro has seen its dividend decline 1.5% per annum on average over the past 10 years, which is not great to see.

Final Takeaway

Is Remgro an attractive dividend stock, or better left on the shelf? Earnings per share are growing at an attractive rate, and Remgro is paying out a bit over half its profits. Overall, Remgro looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Our analysis shows 1 warning sign for Remgro and you should be aware of this before buying any shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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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.