Yahoo Finance Is It Worth Considering Rogers Communications Inc. (TSE:RCI.B) For Its Upcoming Dividend?
Rogers Communications Inc. (TSE:RCI.B) stock is about to trade ex-dividend in four days. You will need to purchase shares before the 8th of September to receive the dividend, which will be paid on the 1st of October.
Rogers Communications's upcoming dividend is CA$0.50 a share, following on from the last 12 months, when the company distributed a total of CA$2.00 per share to shareholders. Looking at the last 12 months of distributions, Rogers Communications has a trailing yield of approximately 3.5% on its current stock price of CA$56.9. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
View our latest analysis for Rogers Communications
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. Rogers Communications paid out 60% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Rogers Communications generated enough free cash flow to afford its dividend. Fortunately, it paid out only 47% of its free cash flow in the past year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
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. With that in mind, we're encouraged by the steady growth at Rogers Communications, with earnings per share up 5.0% on average over the last five years. Decent historical earnings per share growth suggests Rogers Communications has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Rogers Communications has delivered 5.6% dividend growth per year on average over the past 10 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
The Bottom Line
Should investors buy Rogers Communications for the upcoming dividend? While earnings per share growth has been modest, Rogers Communications's dividend payouts are around an average level; without a sharp change in earnings we feel that the dividend is likely somewhat sustainable. Pleasingly the company paid out a conservatively low percentage of its free cash flow. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.
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 Rogers Communications and you should be aware of this before buying any shares.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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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