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Rush Enterprises, Inc.'s (NASDAQ:RUSH.A) investors are due to receive a payment of $0.18 per share on 18th of March. This means the annual payment will be 1.3% of the current stock price, which is lower than the industry average.
View our latest analysis for Rush Enterprises
Rush Enterprises' Payment Could Potentially Have Solid Earnings Coverage
If it is predictable over a long period, even low dividend yields can be attractive. Rush Enterprises is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.
The next year is set to see EPS grow by 28.5%. If the dividend continues on this path, the payout ratio could be 18% by next year, which we think can be pretty sustainable going forward.
Rush Enterprises Is Still Building Its Track Record
It is great to see that Rush Enterprises has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2018, the dividend has gone from $0.213 total annually to $0.72. This means that it has been growing its distributions at 19% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.
The Dividend Looks Likely To Grow
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Rush Enterprises has seen EPS rising for the last five years, at 17% per annum. Rush Enterprises definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
Our Thoughts On Rush Enterprises' Dividend
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Rush Enterprises' payments, as there could be some issues with sustaining them into the future. While Rush Enterprises is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Rush Enterprises that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.