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Important news for shareholders and potential investors in RGC Resources Inc (NASDAQ:RGCO): The dividend payment of US$0.15 per share will be distributed to shareholders on 01 November 2018, and the stock will begin trading ex-dividend at an earlier date, 12 October 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine RGC Resources’s latest financial data to analyse its dividend characteristics.
Check out our latest analysis for RGC Resources
5 questions I ask before picking a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
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Does it pay an annual yield higher than 75% of dividend payers?
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Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
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Has dividend per share amount increased over the past?
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Is is able to pay the current rate of dividends from its earnings?
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Will it be able to continue to payout at the current rate in the future?
How well does RGC Resources fit our criteria?
The current trailing twelve-month payout ratio for the stock is 67%, which means that the dividend is covered by earnings. Going forward, analysts expect RGCO’s payout to remain around the same level at 65% of its earnings, which leads to a dividend yield of 2.6%. Furthermore, EPS should increase to $0.98.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. RGCO has increased its DPS from $0.42 to $0.62 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock.
Relative to peers, RGC Resources produces a yield of 2.4%, which is high for Gas Utilities stocks but still below the market’s top dividend payers.
Next Steps:
Taking into account the dividend metrics, RGC Resources ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three pertinent factors you should further research: