The Safety Net: Your Guns Are Safe, but How About Your Dividend?

Marc Lichtenfeld By Marc Lichtenfeld, Chief Income Strategist, The Oxford Club

Safety Net

Last night, Trump clinched the presidency and Republicans defended their grip on Congress. And today, gun owners have reason to rejoice…

They’ll no longer have to fear Clinton coming after their guns or threatening their constitutional rights.

Gun enthusiasts love their guns. And investors of gunmaker Sturm Ruger (NYSE: RGR) love their dividends.

The stock yields 2.5%. But is its dividend safe?

The stock dropped 14% today. Hillary’s loss alleviated the frenzy to stockpile guns and ammunition. As a result, investors fear the company’s near-term results won’t be as strong as previously expected.

That could be a problem for its dividend.

Questionable Track Record

Sturm Ruger’s dividend history is not particularly impressive.

Since 2009, it’s raised its dividend 16 times and cut it 12 times, excluding special dividend payments.

That includes the most recent quarter, in which its dividend was lowered to $0.41 per share from $0.49.

sturm-ruger-dividend
The company’s policy is to pay out 40% of net income to shareholders in quarterly dividends. As a result, its dividend fluctuates from quarter to quarter.

If sales decline or expenses increase, net income will head lower – and so will the dividend. But if the profits rise, the dividend will too.

There’s nothing wrong with this type of policy as long as investors understand it.

It benefits Sturm Ruger because the company knows it can afford whatever dividend it declares. But investors shouldn’t rely on the dividend to pay their bills because it’ll change every quarter.


As a result, it’s difficult to forecast future dividend payouts. Surprisingly, no analysts have published estimates, and the company has not offered guidance.

All we can go on is the company’s dividend payment history. And it’s been all over the place.

Shareholders should expect a dividend cut in the near future as earnings fluctuate.

Your guns are safe… but your dividend? Not so much.

Dividend Safety Rating: Ddividend-grade-guide

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Good investing,

Marc