Yahoo Finance Should You Buy Richards Packaging Income Fund (TSE:RPI.UN) For Its Upcoming Dividend?
Richards Packaging Income Fund (TSE:RPI.UN) is about to trade ex-dividend in the next three days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled 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. Accordingly, Richards Packaging Income Fund investors that purchase the stock on or after the 29th of June will not receive the dividend, which will be paid on the 14th of July.
The company's next dividend payment will be CA$0.11 per share, and in the last 12 months, the company paid a total of CA$1.32 per share. Calculating the last year's worth of payments shows that Richards Packaging Income Fund has a trailing yield of 2.2% on the current share price of CA$60.26. If you buy this business for its dividend, you should have an idea of whether Richards Packaging Income Fund's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for Richards Packaging Income Fund
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Richards Packaging Income Fund paid out a comfortable 30% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It distributed 35% of its free cash flow as dividends, a comfortable payout level for most companies.
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 how much of its profit Richards Packaging Income Fund paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Richards Packaging Income Fund has grown its earnings rapidly, up 35% a year for the past five years. Richards Packaging Income Fund is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Richards Packaging Income Fund has lifted its dividend by approximately 5.3% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.
Final Takeaway
Should investors buy Richards Packaging Income Fund for the upcoming dividend? We love that Richards Packaging Income Fund is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. There's a lot to like about Richards Packaging Income Fund, and we would prioritise taking a closer look at it.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Every company has risks, and we've spotted 1 warning sign for Richards Packaging Income Fund you should know about.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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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