Yahoo Finance Rathbones Group's (LON:RAT) Final Yearly Dividend Is To Be £0.24
Rathbones Group Plc's ( LON:RAT ) dividend has been announced as £0.24 on the 14th of May. This final dividend is lower than their usual final yearly dividend, however Rathbones brought forward a portion of the final dividend in the form of a special dividend for shareholders on the register prior to the deal to acquire Investec IW&I. This means the annual payment is 5.6% of the current stock price, which is above the average for the industry.
View our latest analysis for Rathbones Group
Rathbones Group's Earnings Easily Cover The Distributions
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, earnings were actually smaller than the dividend, and the company was actually spending more cash than it was making. Paying out such a large dividend compared to earnings while also not generating free cash flows is a major warning sign for the sustainability of the dividend as these levels are certainly a bit high.
EPS is set to grow by 172.5% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 78% which is a bit high but can definitely be sustainable.
Dividend Volatility
The company has been paying a dividend for a long time, and it has been increasing too. The annual payment during the last 10 years was £0.48 in 2014, and the most recent fiscal year payment was £0.87. This works out to be a compound annual growth rate (CAGR) of approximately 6.1% a year over that time. A reasonable rate of dividend growth is good to see.
Dividend Growth Potential Is Shaky
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Rathbones Group's earnings per share has shrunk at 13% 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. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.
We should note that Rathbones Group has issued stock equal to 47% of shares outstanding, although investors should be aware that the shares were issued as part of the M&A deal which saw Rathbones acquire Investec Wealth & Investment UK. Nevertheless, trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.
We're Not Big Fans Of Rathbones Group's Dividend
Overall, the dividend looks like it may have been a bit high. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. We don't think that this is a great candidate to be an 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. For example, we've identified 4 warning signs for Rathbones Group (1 is potentially serious!) 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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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.
