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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Rayonier Inc. (NYSE:RYN) is about to trade ex-dividend in the next 3 days. If you purchase the stock on or after the 12th of September, you won't be eligible to receive this dividend, when it is paid on the 27th of September.
Rayonier's next dividend payment will be US$0.27 per share, on the back of last year when the company paid a total of US$1.08 to shareholders. Based on the last year's worth of payments, Rayonier has a trailing yield of 4.0% on the current stock price of $27.1. 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! We need to see whether the dividend is covered by earnings and if it's growing.
View our latest analysis for Rayonier
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Rayonier paid out 57% of its earnings to investors last year, a normal payout level for most businesses. While Rayonier seems to be paying out a very high percentage of its income, REITs have different dividend payment behaviour and so, while we don't think this is great, we also don't think it is unusual. A useful secondary check can be to evaluate whether Rayonier generated enough free cash flow to afford its dividend. Rayonier paid out more free cash flow than it generated - 111%, to be precise - last year, which we think is concerningly high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.
Rayonier paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Rayonier's ability to maintain its dividend.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Rayonier's earnings per share have fallen at approximately 8.4% a year over the previous 5 years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.