Ricegrowers Limited (ASX: SGLLV) Investors are expected to receive a payment of AU $ 0.33 per share on July 30. The dividend yield will be 4.9% based on this payment which is still above the industry average.
See our latest analysis for rice farmers
The dividend of the rice farmers is well covered by the profits
We like to see robust dividend yields, but it doesn’t matter if the payout isn’t sustainable. Before this announcement, the company paid 95% of what it earned. Without increased earnings and cash flow, it would be difficult for the company to continue paying the dividend at this level.
Going forward, earnings per share are expected to increase 38.8% over the next year. Assuming the dividend continues in the same direction it charted recently, our estimates show the payout ratio to be 72%, which puts it in a fairly comfortable range.
Rice farmers don’t have a long payment history
The rice farmer dividend has been fairly stable for a little while now, but we will remain cautious until this is demonstrated in a few years. The dividend went from AU $ 0.26 in 2015 to the last annual payment of AU $ 0.33. This means that he increased his distributions by 4.1% per year during that period. It’s good to see at least some dividend growth. Yet with a relatively short dividend payout history, we wouldn’t want to rely too heavily on this dividend.
The dividend has limited growth potential
Investors might be attracted to the stock depending on the quality of its payment history. Unfortunately, things are not as good as they seem. Rice farmers’ EPS has declined by around 17% per year over the past five years. Such rapid declines certainly have the potential to constrain dividend payments if the trend continues in the future. However, next year is looking good, with earnings expected to increase. We would just wait until it becomes a model before we get too excited.
We are not big fans of the rice farmers dividend
In summary, while it is good to see that the dividend has not been reduced, we believe that at current levels the payout is not particularly sustainable. The company doesn’t earn enough to pay as much as it does, and the other factors don’t look particularly promising either. All in all, this does not excite us very much from a revenue standpoint.
Market movements testify to the high value of a coherent dividend policy compared to a more unpredictable one. However, there are other things for investors to consider when analyzing the performance of stocks. For example, we have selected 1 warning sign for rice farmers that investors should consider. If you are a dividend investor, you can also view our curated list of high performing dividend stocks.
This Simply Wall St article is general in nature. 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 material. Simply Wall St has no position in any of the stocks mentioned.
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