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Readers hoping to buy Ready Capital Corporation (NYSE:RC) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. This means that investors who purchase shares on or after the 27th of September will not receive the dividend, which will be paid on the 31st of October.
Ready Capital's next dividend payment will be US$0.4 per share. Last year, in total, the company distributed US$1.6 to shareholders. Based on the last year's worth of payments, Ready Capital stock has a trailing yield of around 9.8% on the current share price of $16.32. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
See our latest analysis for Ready Capital
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. Its dividend payout ratio is 85% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth We'd be worried about the risk of a drop in earnings.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Ready Capital has grown its earnings rapidly, up 98% a year for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Ready Capital's dividend payments are effectively flat on where they were three years ago.
Final Takeaway
Is Ready Capital worth buying for its dividend? Earnings per share are growing at an attractive rate, and Ready Capital is paying out a bit over half its profits. Overall, Ready Capital looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.