Is it smart to buy Royal Gold, Inc. (NASDAQ: RGLD) before it becomes ex-dividend?

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Or Royal, Inc. The stock (NASDAQ: RGLD) is about to trade excluding dividend in 2 days. The ex-dividend date is one working day before the registration date, which is the deadline by which shareholders must be present on the books of the company to be eligible for a dividend payment. It is important to know the ex-dividend date because any transaction in the share must have been settled by the registration date at the latest. So you can buy Royal Gold shares before July 1 in order to receive the dividend, which the company will pay out on July 16.

The company’s upcoming dividend is US $ 0.30 per share, continuing the past 12 months when the company has distributed a total of US $ 1.20 per share to shareholders. Looking at the last 12 months of distributions, Royal Gold has a sliding return of around 1.1% on its current price of $ 112.4. Dividends are a major contributor to returns on investment for long-term holders, but only if the dividend continues to be paid. Accordingly, readers should always check whether Royal Gold has been able to increase its dividends or whether the dividend could be reduced.

Check out our latest review for Royal Gold

Dividends are usually paid out of business income, so if a business pays more than it earned, its dividend is usually at risk of being reduced. Last year, Royal Gold paid 29% of its profits. Yet cash flow is still more important than earnings in valuing a dividend, so we need to see if the company has generated enough cash to pay for its distribution. It distributed 30% of its free cash flow in the form of dividends, a comfortable level of distribution for most companies.

It is positive to see that Royal Gold’s dividend is covered by both earnings and cash flow, as this is usually a sign that the dividend is sustainable, and a lower payout ratio usually suggests a larger margin. security before the dividend is cut.

Click here to view the company’s payout ratio, as well as analysts’ estimates of its future dividends.

NasdaqGS: RGLD Historical Dividend June 28, 2021

Have profits and dividends increased?

Stocks of companies that generate sustainable earnings growth often offer the best dividend prospects because it’s easier to raise the dividend when earnings rise. Investors love dividends, so if earnings go down and the dividend is reduced, expect a stock to be sold massively at the same time. It is encouraging to see that Royal Gold has grown its profits rapidly, increasing by 39% per year over the past five years. Royal Gold is paying less than half of its earnings and cash flow, while simultaneously increasing earnings per share at a rapid rate. This is a very favorable combination which can often lead to a multiplication of the dividend in the long run, if profits increase and the company pays a higher percentage of its profits.

Most investors will primarily assess a company’s dividend prospects by checking the historical rate of dividend growth. Over the past 10 years, Royal Gold has increased its dividend by around 13% per year on average. It’s great to see earnings per share increasing rapidly over several years, and dividends per share increasing at the same time.

To summarize

Is Royal Gold an attractive dividend-paying stock, or better still, is it left on the shelf? We like the fact that Royal Gold is increasing its earnings per share while simultaneously paying out a small percentage of its earnings and cash flow. These characteristics suggest that the company is reinvesting in growing its business, while the prudent payout ratio also implies a reduced risk of dividend reduction in the future. It is a promising combination that should mark this company worthy of further attention.

Wondering what the future holds for Royal Gold? Find out what the six analysts we follow are forecasting, with this visualization of its historical and future estimated earnings and cash flow

However, we don’t recommend simply buying the first dividend stock you see. Here is a list of interesting dividend paying stocks with a yield above 2% and a dividend coming soon.

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This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material. Simply Wall St has no position in any of the stocks mentioned.
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