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It looks like RLI Corp. (NYSE:RLI) is about to go ex-dividend in the next 3 days. You will need to purchase shares before the 27th of November to receive the dividend, which will be paid on the 18th of December.
RLI's next dividend payment will be US$1.24 per share, on the back of last year when the company paid a total of US$1.96 to shareholders. Based on the last year's worth of payments, RLI has a trailing yield of 1.9% on the current stock price of $101.98. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether RLI can afford its dividend, and if the dividend could grow.
Check out our latest analysis for RLI
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. RLI paid out a comfortable 33% of its profit last year.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's not ideal to see RLI's earnings per share have been shrinking at 2.2% a year over the previous five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, RLI has lifted its dividend by approximately 13% a year on average.
The Bottom Line
From a dividend perspective, should investors buy or avoid RLI? RLI's earnings per share are down over the past five years, although it has the cushion of a low payout ratio, which would suggest a cut to the dividend is relatively unlikely. In sum this is a middling combination, and we find it hard to get excited about the company from a dividend perspective.
With that being said, if dividends aren't your biggest concern with RLI, you should know about the other risks facing this business. For example - RLI has 2 warning signs we think you should be aware of.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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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