Yahoo Finance Renishaw plc (LON:RSW) Will Pay A UK£0.17 Dividend In Three Days
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 Renishaw plc (LON:RSW) is about to go ex-dividend in just 3 days. The ex-dividend date occurs one day 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Renishaw's shares on or after the 9th of March, you won't be eligible to receive the dividend, when it is paid on the 11th of April.
The company's next dividend payment will be UK£0.17 per share, and in the last 12 months, the company paid a total of UK£0.73 per share. Calculating the last year's worth of payments shows that Renishaw has a trailing yield of 1.8% on the current share price of £40.6. If you buy this business for its dividend, you should have an idea of whether Renishaw's dividend is reliable and sustainable. So we need to investigate whether Renishaw can afford its dividend, and if the dividend could grow.
See our latest analysis for Renishaw
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Renishaw paid out a comfortable 46% of its profit last year. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Renishaw paid out more free cash flow than it generated - 181%, to be precise - last year, which we think is concerningly high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.
While Renishaw's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were Renishaw to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Renishaw earnings per share are up 2.4% per annum over the last five years. Earnings have been growing somewhat, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Renishaw has lifted its dividend by approximately 6.5% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
From a dividend perspective, should investors buy or avoid Renishaw? Renishaw has seen its earnings per share grow steadily and paid out less than half its profit over the last year. Unfortunately, its dividend was not well covered by free cash flow. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.
Curious what other investors think of Renishaw? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.
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