Yahoo Finance Resources Connection (NASDAQ:RGP) Has Announced A Dividend Of $0.14
Resources Connection, Inc. (NASDAQ:RGP) will pay a dividend of $0.14 on the 13th of June. Based on this payment, the dividend yield on the company's stock will be 5.0%, which is an attractive boost to shareholder returns.
See our latest analysis for Resources Connection
Resources Connection's Payment Has Solid Earnings Coverage
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before this announcement, Resources Connection was paying out 84% of earnings, but a comparatively small 54% of free cash flows. This leaves plenty of cash for reinvestment into the business.
According to analysts, EPS should be several times higher next year. If the dividend continues along recent trends, we estimate the payout ratio will be 30%, which would make us comfortable with the dividend's sustainability, despite the levels currently being elevated.
Resources Connection Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was $0.28 in 2014, and the most recent fiscal year payment was $0.56. This implies that the company grew its distributions at a yearly rate of about 7.2% over that duration. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.
Dividend Growth May Be Hard To Achieve
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. Over the past five years, it looks as though Resources Connection's EPS has declined at around 4.3% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Resources Connection's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. This company is not in the top tier of income providing stocks.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Resources Connection that investors need to be conscious of moving forward. Is Resources Connection not quite the opportunity you were looking for? Why not check out 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.
