Net sales and EPS performance in 2015 and 2016

Sturm Ruger (RGR) is a domestic designer, manufacturer, and seller of firearms. The company’s net sales jumped 21% in 2016 compared to 1% in 2015, offset by higher costs. Firearms sales drove the company’s growth, which was offset by a slowdown in castings sales in 2016.

The above factors led to 28% growth in gross profit in 2016 after growth of just 2% in 2015. Operating income rose 42% in 2016 compared to 68% in 2015. The difference was due to a rise in operating expenses in 2016 after a drop in 2015. The company’s interest expenses have risen gradually over the years. These factors translated into 43% growth in 2016 compared to 65% in 2015. Share buybacks further enhanced the EPS numbers.

How RGR’s Dividend Cut Affected Its Yield

Net sales and EPS performance in 1H17

Sturm Ruger saw a 12% decline in its net sales for 1H17. Both the segments contributed to the decline in sales, which was further supported by lower costs, which led to a drop of 22% in gross profit. Operating income fell 32% due to the above factors and a decline in operating expenses. Interest expenses also fell during the period. The company’s EPS fell 27% during the period, offset by share buybacks.

Dividend yield

The company cut dividends in 2017. However, it still has a 3.1% dividend yield, as prices have dropped 5.7% on a YTD basis. In comparison, the Dow Jones Industrial Average (DJIA-INDEX) (DIA) has a dividend yield of 2.3% and YTD price gains of 15.7%. The S&P 500 (SPX-INDEX) (SPY) has a dividend yield of 2.3% and YTD price gains of 14%. The NASDAQ Composite (COMP-INDEX) (ONEQ) has YTD price gains of 22.7%. Sturm Ruger generated enough free cash flow in 2015 and 2016 to pay off its dividends.

How RGR’s Dividend Cut Affected Its Yield

The WisdomTree U.S. SmallCap Dividend Growth Fund (DGRS) has a 2.4% dividend yield and a PE of 17.6x. The WisdomTree US High Dividend Fund (DHS) has a 3.1% dividend yield and a PE of 21x.

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