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My seek for dividend shares brings me to Robert Walters (LSE: RWA) with its big 12.5% forecast yield. The corporate is having a troublesome time, with the financial system of the previous few years taking a toll on its specialist top-end recruitment providers.
Working revenue fell 80% in 2024 to £5.2m, with an earnings per share (EPS) lack of 9.1p. The share value has crashed 79% since a peak in early 2022.
However the firm maintained its 2024 dividend at 23.5p per share “in view of steadiness sheet energy“. Web money of £52.5m is sufficient to cowl that working loss 10 instances over.
Analysts have the dividend holding regular for the subsequent few years too — regardless that forecast earnings gained’t come near protecting it this yr or subsequent. But when these predictions come true, we may see cowl by 2027 — solely about 1.1 instances, however again on the suitable aspect.
Primed for a reduce?
Do huge traders believe in Robert Walters’ restoration and belief the dividend prospects? In the event that they did, certainly they’d snap up the shares and lock in that huge dividend yield, wouldn’t they? The worth collapse exhibits that’s not occurring.
The corporate’s technique shouldn’t be completely clear. A Q1 replace in April reported web price earnings down 16%. It spoke of difficult situations, restricted visibility, macroeconomic uncertainty…
Apart from preserving a good rein on prices, I’m undecided the plan is to do far more than simply await issues to get higher. However which may really be what’s wanted.
Anticipating ups and downs
This enterprise is cyclical, and it might probably come to a close to halt when instances are dangerous. But when that, then perhaps simply construct up sufficient money to have the ability to sit out the down spells? Robert Walters does appear to have mastered the money aspect of issues.
Why would Metropolis traders draw back if that’s what’s occurring? Properly, perhaps they’re simply not excited about a small firm with a market cap of solely £120m. With the sums the large gamers have to speculate, they’d solely be capable to make pocket cash at greatest.
What would possibly flip issues spherical? The subsequent buying and selling replace is due on 15 July, adopted by 2025 half-year outcomes on 31 July. Will we see indicators of a revenue upturn for the total yr? Perhaps even a transfer again in direction of constructive EPS whereas analysts anticipate one other per-share loss this yr?
Small-cap unpredictability
If the outlook seems to be brightening, I wouldn’t be shocked to see traders begin to get again on board. And extra constructive noises concerning the dividend may actually present a confidence increase.
However let’s get again to the important thing danger, which isn’t a small one. We want the corporate to have sufficient money to maintain paying the dividends till earnings get again on monitor to cowl them. In any other case, shareholders may need to take a hefty dividend reduce on the chin.
The small-cap investor in me thinks this must be a danger value contemplating.
