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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see RPM International Inc. (NYSE:RPM) is about to trade ex-dividend in the next three days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, RPM International investors that purchase the stock on or after the 13th of April will not receive the dividend, which will be paid on the 29th of April.
The company's next dividend payment will be US$0.40 per share, and in the last 12 months, the company paid a total of US$1.60 per share. Last year's total dividend payments show that RPM International has a trailing yield of 1.9% on the current share price of $85.59. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether RPM International has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for RPM International
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. That's why it's good to see RPM International paying out a modest 45% of its earnings. 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 paid out an unsustainably high 316% of its free cash flow as dividends over the past 12 months, which is worrying. It's pretty hard to pay out more than you earn, so we wonder how RPM International intends to continue funding this dividend, or if it could be forced to cut the payment.
While RPM International's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to RPM International's ability to maintain its dividend.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see RPM International earnings per share are up 4.9% per annum over the last five years. Earnings have been growing somewhat, but we're concerned dividend payments consumed most of the company's cash flow over the past year.