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The board of RB Global, Inc. (NYSE:RBA) has announced that it will pay a dividend on the 21st of December, with investors receiving $0.27 per share. Based on this payment, the dividend yield on the company's stock will be 1.8%, which is an attractive boost to shareholder returns.
Check out our latest analysis for RB Global
RB Global's Dividend Is Well Covered By Earnings
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, the company was paying out 111% of what it was earning. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.
The next 12 months could see EPS growing very rapidly. Assuming the dividend continues along the path it has been on, the payout ratio could get to 75% which is certainly still sustainable.
RB Global Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2013, the annual payment back then was $0.49, compared to the most recent full-year payment of $1.08. This implies that the company grew its distributions at a yearly rate of about 8.2% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.
Dividend Growth Is Doubtful
The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. In the last five years, RB Global's earnings per share has shrunk at approximately 7.0% per annum. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.
An additional note is that the company has been raising capital by issuing stock equal to 64% of shares outstanding in the last 12 months. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.
The Dividend Could Prove To Be Unreliable
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about RB Global's payments, as there could be some issues with sustaining them into the future. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We would probably look elsewhere for an income investment.