Yahoo Finance RGC Resources (NASDAQ:RGCO) Has Announced A Dividend Of $0.1975
RGC Resources, Inc. (NASDAQ:RGCO) will pay a dividend of $0.1975 on the 1st of May. This means the dividend yield will be fairly typical at 3.4%.
See our latest analysis for RGC Resources
RGC Resources' Distributions May Be Difficult To Sustain
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Even in the absence of profits, RGC Resources is paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.
Recent, EPS has fallen by 35.4%, so this could continue over the next year. This means the company won't be turning a profit, which could place managers in the tough spot of having to choose between suspending the dividend or putting more pressure on the balance sheet.
RGC Resources Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2013, the annual payment back then was $0.467, compared to the most recent full-year payment of $0.79. This implies that the company grew its distributions at a yearly rate of about 5.4% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
The Dividend Has Limited Growth Potential
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. Over the past five years, it looks as though RGC Resources' EPS has declined at around 35% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.
An additional note is that the company has been raising capital by issuing stock equal to 17% of shares outstanding in the last 12 months. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.
RGC Resources' Dividend Doesn't Look Sustainable
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. This company is not in the top tier of income providing stocks.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 4 warning signs for RGC Resources you should be aware of, and 3 of them make us uncomfortable. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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