Benzinga | Jan 5, 2021 10:30AM EST

Is Resources Connection's Dividend Safe?

In today's dividend safety check, Benzinga Insights looks into Resources Connection (NASDAQ:RGP) to see if its 4.92% dividend yield is safe as the company is releasing its earnings on January 6, 2021 after the bell. To better understand this, we will be looking into the earnings-to-dividend payout ratio and whether the company's dividend has recently been cut.

Resources Connection's Payout Ratio

A dividend's affordability can be measured by its payout ratio, which is equal to dividends per share divided by earnings per share. Resources Connection's payout ratio of 100.0% is relatively high. When a company's payout ratio is near (or above) 100%, a company may not have enough money to cover its dividend, possibly needing to borrow money or cut the dividend to stay solvent.

Has Resources Connection Cut Its Dividend in the Recent Past?

Generally, past behavior is not highly predictive of the future. However, companies that have recent histories of dividend cuts have less incentive to appease income investors than companies with historically consistent or rising dividends. Resources Connection has cut its dividend recently; in fact, the last cut was in 2021. This implies that the company's management is willing to solve budgetary issues by cutting dividends and could do so again in the future.

How Safe Is Resources Connection's Dividend Overall?

Resources Connection has failed two of our dividend safety tests. It has a high payout ratio but has three recent cases of dividend cuts. With all of this in mind, it is unlikely that Resources Connection will cut its dividend next quarter.

Looking for more help identifying reliable investments? Check out Benzinga's Breakout Opportunity Letter.