Last update on 2024-06-28

Resources Connection (RGP) - Dividend Analysis (Final Score: 6/8)

Get a comprehensive analysis of Resources Connection (RGP) dividend performance and stability, evaluated through an 8-criteria scoring system. Final Score: 6/8.

Short Analysis - Dividend Score: 6

We're running Resources Connection (RGP) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

Overall, the dividend analysis of Resources Connection (RGP) yielded a score of 6 out of 8 based on the criteria. RGP exhibits some strengths like being above average in dividend yield and having a low payout ratio. However, its major drawbacks include the inconsistency in dividend growth and frequent fluctuations in dividend payments, which raise concerns about reliability and sustainability for income-focused investors. The company's recent financial data also indicates difficulties in maintaining dividend coverage both in terms of earnings and cash flows. The dividend history is erratic, further evidenced by unstable stock repurchases.

Insights for Value Investors Seeking Stable Income

While Resources Connection (RGP) shows some potential, particularly in maintaining a lower payout ratio, the high volatility and inconsistency in its dividends make it a risky option for those who prioritize steady income. If you are an income-focused investor seeking reliable dividend stocks, it might be better to look for more stable alternatives. Therefore, it’s recommended to approach RGP with caution, especially until there is evidence of more consistent and reliable dividend payments.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield represents the return a company pays out to its shareholders in the form of dividends. This is important to consider as it indicates the company's ability to generate income for its shareholders.

Resources Connection (RGP) has a current dividend yield of 1.976%, which is slightly higher than the industry average of 1.83%. Over the past 20 years, RGP's dividend yield has been very volatile, peaking at 6.8833% in 2007 and dropping to 0% in some years. This inconsistency can raise concerns among investors about the company's reliability in dividend payments. However, the current yield being higher than the industry average suggests a positive short-term trend. Considering the stock price has fluctuated over the years but is currently down from its peak, and the dividend per share has also seen variations, a cautious approach is recommended.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate criterion examines the annual percentage increase in dividend payments made by a company to its shareholders. More than 5% growth over 20 years is considered strong.

Evaluating the dividend growth rate for Resources Connection (RGP) over the last 20 years, we observe significant volatility in the dividend per share ratio, indicating frequent fluctuations. Notably, some years demonstrate drastic declines (e.g., 2008: -100%, 2023: -50%), while others report substantial increases (e.g., 2011: 125%, 2018: 36.9565%). The average dividend ratio over this period is approximately 6.08%. Although this average exceeds the 5% threshold, the variability and negative years suggest that the growth is inconsistent. Consequently, this trend cannot be regarded as uniformly favorable because sustainable and predictable dividend growth is a vital consideration for dividend investors. The occasional high growth rates are overshadowed by periods of significant decline.

Average annual Payout Ratio lower than 65% in the last 20 years?

The average payout ratio gauges how much of a company’s earnings are being paid out as dividends to shareholders. A ratio under 65% is typically considered sustainable and allows for reinvestment in the business.

Resources Connection (RGP) has an average payout ratio of 24.31% over the evaluated period from 2007 to 2023. This shows a very conservative dividend policy, ensuring that the company retains a significant portion of its earnings for reinvestment and growth. While there were some spikes, notably in 2017 and 2018 with payout ratios of 73.16% and 105.79% respectively—these were temporary and not indicative of a long-term unsustainable payout trend. Overall, the company’s dividend policy over the past two decades demonstrates prudence and financial health, which is favorable for sustained dividend payments and long-term growth.

Dividends Well Covered by Earnings?

Dividends are well covered by earnings.

The criterion of dividends well-covered by earnings is fundamental to assessing a company's dividend sustainability and investor confidence. Earnings Per Share (EPS) indicates the portion of a company's profit allocated to each outstanding share of common stock, serving as an indicator of profitability. When covering dividends, operating efficiency and profitability must be considered to assure reliability for stockholders. Comparing EPS from 2017-2023 (0.6288, 0.5955, 0.996, 0.8842, 0.7776, 2.0385, 1.6272) to dividends per share in the same timeframe (0.46, 0.63, 0.54, 0.56, 0.56, 0.56, 0.28), you observe values substantially vary annually which foretells inconsistent coverage levels. A covered ratio greater than 1 indicates a comfortable profit margin – exemplified in 2018 (1.06) – while less than 1 suggests potential difficulty in maintaining payouts, seen in 2019 and recent fiscal years (2020 till 2023) with coverage ratios ranging from 0.7202 to just 0.1721 which speaks of adverse financial implications.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow implies that the company generates sufficient free cash flow to support its dividend payouts, which is crucial for maintaining dividend sustainability without depleting its cash reserves.

From 2017 to 2023, the data reveals that RGP's dividends are not consistently well-covered by its free cash flow. With the free cash flow cover ratio varying significantly from a high of 1.08 in 2018 to a low of 0.24 in 2023, there is instability. Specifically, the ratio dropped from 0.60 in 2017 to 1.08 in 2018 indicating an initial improvement, but it fell sharply subsequently, touching 0.24 in 2023. This downtrend suggests RGP might struggle to maintain its dividend payouts without dipping into reserves, especially if free cash flow does not improve. The current trend could be seen as unfavorable for dividend sustainability.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments, defined as dividends per share not dropping by more than 20% over the last two decades, is crucial for income-seeking investors. This criterion helps ensure a reliable income stream and indicates the company's financial health.

Resour‎ces Connection (RGP) has had an inconsistent dividend history over the last 20 years. Specifically, the dividends were entirely cut to $0 from 2008 to 2010, rebounding very slowly thereafter. For example, dividends per share went from $1.25 in 2007 down to $0 in 2008, indicating financial strain. Although the dividends did recover over the following decade, reaching $0.63 in 2018, they dropped significantly again to $0.28 in 2023. This level of volatility is generally unfavorable for income-seeking investors, making RGP a less reliable choice based on this criterion.

Dividends Paid for Over 25 Years?

Dividends Paid for Over 25 Years looks at whether the company has consistently paid dividends for a long period, signaling financial stability and commitment to returning value to shareholders.

The historical dividend data for Resources Connection (RGP) shows an inconsistent pattern that falls short of the criterion's expectation of over 25 years of dividend payments. Periods from 2008 to 2010 did not witness any dividend issuance, breaking the continuity. Despite an increasing trend in dividends per share from 2010 to 2017, the payment once again became uncertain in 2023 with a reduction from $0.56 to $0.28. The inconsistent pattern and breaks in the timeline make it evident that Resources Connection has struggled to maintain a stable and longstanding dividend payout history. This is seen as a negative trend for long-term income-seeking investors who prioritize uninterrupted and reliable dividend flows from their investments.

Reliable Stock Repurchases Over the Past 20 Years?

Assessing reliable stock repurchases involves evaluating if the company consistently buys back shares, reducing the overall share count. This is important since it can indicate effective capital allocation, boost earnings per share (EPS), and potentially signal management’s confidence in the company’s future. Regular repurchases may also support share prices and return capital to shareholders indirectly.

The data indicates that from 2007 to 2013, the number of shares remained constant at 33,407,000. In 2014, the share count dropped to 0, suggesting a repurchase or some form of stock consolidation/cancellation. From 2015 to 2019, there was no data available but by 2019, the number of shares stands at 31,614,000, followed by a slight decrease over subsequent years but rises again to 33,407,000 by 2023. Significant events include noticeable share count decreases in 2017 (29,662,000), 2018 (31,614,000), and 2019 (31,596,000). The changes between 2019 to 2023 indicate variances but less stable repurchasing patterns. These fluctuations suggest some level of buyback, however, the only truly reliable repurchase years were 2014 (based on provided information likely erroneous since the share count drops to 0), and then 2019. The evidence does not strongly support a consistent buyback strategy, thereby suggesting the average change (-5.4915) could denote sporadic rather than reliable repurchases, reflecting an area where the company could improve its capital allocation strategy. This trend might not inspire high shareholder confidence impacting long-term investment appeal.