How Likely Is a Dividend Cut From Richardson Electronics?

In today's dividend safety check, Benzinga Insights evaluates Richardson Electronics RELL to check if its 5.63% dividend yield is safe or not, as the company is releasing its earnings on January 6, 2021 after the bell. We will assess this based on its earnings-to-dividend payout ratio and whether the company's dividend has recently been cut.

Richardson Electronics's Payout Ratio

Payout ratio is an important measure of dividend affordability and is equal to dividends per share divided by earnings per share. Richardson Electronics has a payout ratio of -66.67%. When a company generates negative earnings and still manages to pay dividends to its shareholders, it has a negative payout ratio. A negative payout ratio of any size is a red flag for investors. Richardson Electronics's payout ratio of -66.67% is a bad sign for investors. When a company's payout ratio is negative, the company is losing money. In this situation, if a company still manages to pay dividends, that is a red flag that the dividend is in danger of being cut or has already been cut for the next payout cycle. Richardson Electronics has a payout ratio of -66.67%, which may be an area of concern for investors. Sometimes, a company will pay dividends to its shareholders even if it is losing money, and in that case the company usually manages to raise funds through cash in hand, issuing debt/equity, or selling assets.

Has Richardson Electronics Cut Its Dividend in the Recent Past?

Typically, it is difficult to predict future behavior based on past activities, but companies with recent histories of dividend cuts could cut them again. If a company does not have a history of consistent or rising dividends, it has less incentive to appease income investors than companies that do. Richardson Electronics's last dividend cut was in 2021. Such a recent dividend cut implies the company's management is willing to cut its dividend again in the future to solve budgetary issues.

How Safe Is Richardson Electronics's Dividend Overall?

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

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