Some investors rely on dividends to grow their wealth, and if you’re one of those dividend sleuths, you might be intrigued to know that Republic Services, Inc. (NYSE: RSG) is set to be ex-dividend in just four days. Typically, the ex-dividend date is one business day prior to the record date which is the date a company determines which shareholders are eligible to receive a dividend. The ex-dividend date is important because every time a stock is bought or sold, the transaction takes at least two business days to settle. In other words, investors can buy Republic Services shares before September 30 in order to be eligible for the dividend, which will be paid on October 15.
The company’s next dividend is US $ 0.46 per share, following the last 12 months when the company distributed a total of US $ 1.84 per share to shareholders. Looking at the last 12 months of distributions, Republic Services has a rolling return of around 1.5% on its current price of $ 124.81. If you are buying this company for its dividend, you should know if the Republic Services dividend is reliable and sustainable. It is therefore necessary to check whether dividend payments are covered and whether profits are growing.
See our latest review for Republic Services
Dividends are usually paid out of the company’s profits, so if a company pays more than it earned, its dividend is usually at risk of being reduced. Fortunately, Republic Services’ payout ratio is modest, at just 48% of profits. A useful secondary check can be to assess whether Republic Services has generated enough free cash flow to pay its dividend. Fortunately, she has only paid out 36% of her free cash flow in the past year.
It is positive to see that the Republic Services dividend is covered by both earnings and cash flow, as this is usually a sign that the dividend is sustainable, and a lower payout ratio usually suggests a larger margin. security before the dividend is cut.
Click here to view the company’s payout ratio, as well as analysts’ estimates of its future dividends.
Have profits and dividends increased?
Companies with consistently rising earnings per share usually make the best dividend-paying stocks because they generally find it easier to raise dividends per share. If business goes into recession and the dividend is reduced, the business could experience a sharp drop in value. For this reason, we are pleased to see that Republic Services earnings per share have grown by 10% per year over the past five years. Earnings per share have grown rapidly and the company keeps the majority of its profits with the business. Fast-growing companies that reinvest heavily are attractive from a dividend standpoint, especially since they can often increase the payout ratio later.
Another key way to measure a company’s dividend outlook is to measure its historical rate of dividend growth. Republic Services has generated an average annual increase of 8.7% per year in its dividend, based on dividend payments over the past 10 years. It is encouraging to see the company raising its dividends as profits rise, suggesting at least some corporate interest in rewarding shareholders.
The bottom line
Is Republic Services an attractive dividend-paying stock, or better left on the shelf? We love that Republic Services is increasing its earnings per share while simultaneously paying out a small percentage of its earnings and cash flow. These characteristics suggest that the company is reinvesting in growing its business, while the prudent payout ratio also implies reduced risk of dividend reduction in the future. Overall, we think this is an attractive combination worthy of further research.
While it is tempting to invest in Republic Services purely for dividends, you should always be aware of the risks involved. In terms of investment risks, we have identified 1 warning sign with Republic Services and understanding them should be part of your investment process.
If you are in the dividend-paying stock market, we recommend that you check out our list of the highest dividend-paying stocks with a yield above 2% and a future dividend.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St does not have any position in the mentioned stocks.
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