Yahoo Finance Why Ritchie Bros. (RBA) is a Great Dividend Stock Right Now
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Ritchie Bros. In Focus
Ritchie Bros. (RBA) is headquartered in Burnaby, and is in the Business Services sector. The stock has seen a price change of -7.47% since the start of the year. The heavy equipment auctioneer is paying out a dividend of $0.27 per share at the moment, with a dividend yield of 2.02% compared to the Auction and Valuation Services industry's yield of 0.96% and the S&P 500's yield of 1.77%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.08 is up 3.8% from last year. In the past five-year period, Ritchie Bros. has increased its dividend 5 times on a year-over-year basis for an average annual increase of 10.75%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Ritchie Bros.'s current payout ratio is 38%, meaning it paid out 38% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, RBA expects solid earnings growth. The Zacks Consensus Estimate for 2023 is $2.48 per share, which represents a year-over-year growth rate of 2.90%.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that RBA is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).
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Ritchie Bros. Auctioneers Incorporated (RBA) : Free Stock Analysis Report
