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It looks like Richelieu Hardware Ltd. (TSE:RCH) is about to go ex-dividend in the next 3 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Richelieu Hardware's shares on or after the 30th of January, you won't be eligible to receive the dividend, when it is paid on the 13th of February.
The company's next dividend payment will be CA$0.1533 per share, on the back of last year when the company paid a total of CA$0.61 to shareholders. Calculating the last year's worth of payments shows that Richelieu Hardware has a trailing yield of 1.5% on the current share price of CA$41.57. 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 Richelieu Hardware has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for Richelieu Hardware
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Richelieu Hardware paying out a modest 39% 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. Fortunately, it paid out only 33% of its free cash flow in the past year.
It's positive to see that Richelieu Hardware's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
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. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Richelieu Hardware, with earnings per share up 5.9% on average over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.