Yahoo Finance Be Sure To Check Out Reliance Steel & Aluminum Co. (NYSE:RS) Before It Goes Ex-Dividend
It looks like Reliance Steel & Aluminum Co. (NYSE:RS) is about to go ex-dividend in the next 3 days. Ex-dividend means that investors that purchase the stock on or after the 15th of August will not receive this dividend, which will be paid on the 6th of September.
Reliance Steel & Aluminum's next dividend payment will be US$0.55 per share, on the back of last year when the company paid a total of US$2.20 to shareholders. Based on the last year's worth of payments, Reliance Steel & Aluminum has a trailing yield of 2.2% on the current stock price of $98.42. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
View our latest analysis for Reliance Steel & Aluminum
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. Reliance Steel & Aluminum has a low and conservative payout ratio of just 24% of its income after tax. 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. Luckily it paid out just 19% of its free cash flow last year.
It's positive to see that Reliance Steel & Aluminum'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?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Reliance Steel & Aluminum's earnings per share have risen 16% per annum over the last five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Reliance Steel & Aluminum has increased its dividend at approximately 19% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Final Takeaway
Is Reliance Steel & Aluminum an attractive dividend stock, or better left on the shelf? We love that Reliance Steel & Aluminum is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. It's a promising combination that should mark this company worthy of closer attention.
Ever wonder what the future holds for Reliance Steel & Aluminum? See what the nine analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
