RFG Holdings Limited (JSE:RFG): Is the July 2 Ex-Dividend Date a Golden Opportunity?

RFG Holdings Limited (JSE:RFG) is approaching its ex-dividend date on July 2, 2025, offering investors a chance to lock in a dividend yield of 3.6% before the payout. With strong earnings growth, conservative payout ratios, and a history of dividend increases, RFG presents a compelling case for immediate investment—if the risks are manageable. Here's why now could be the time to act.

The Dividend: Well-Covered and Growing

RFG's upcoming dividend of R0.296 per share (gross), payable on July 7, is part of a R0.59 annual dividend based on historical data. This translates to a trailing yield of 3.6% at the current share price of R16.42, which analysts project could rise to 7.8% over the next three years.

The critical question: Is this dividend sustainable?

The answer, based on RFG's financials, is a resounding yes.

• Payout Ratios Are Conservative:
  RFG's dividend is supported by both earnings and free cash flow. In the previous year, the company paid out 68% of earnings as dividends—a moderate level for most businesses. Meanwhile, the dividend consumes only 40% of free cash flow, leaving ample room for reinvestment. Even in the recent interim period (ending March 2025), the payout ratio dipped to 33% of headline earnings, reflecting a cautious approach amid a 12% dip in profits. This flexibility ensures dividends remain insulated from short-term earnings fluctuations.

• History of Reliability:
  RFG has paid dividends for nine consecutive years, with an average annual growth rate of 9.1% over the past decade. This consistency is rare in an uncertain market, and it's underpinned by a 20% annual earnings growth rate over the last five years.

Growth Prospects: A Dual Engine

RFG's dividend is not just sustainable—it's also likely to grow. The company's 20%+ earnings growth trajectory creates a virtuous cycle: higher profits mean more cash to distribute or reinvest. Management has already signaled confidence, with a 50% payout ratio target for headline earnings in coming years.

• Financial Fortitude:
  RFG's debt-to-equity ratio has improved to 22%, down from 33% in prior years, reducing interest costs and freeing cash for dividends. Liquidity metrics like the current ratio and quick ratio are robust, indicating no near-term solvency risks.

• Market Resilience:
  While the international segment faced challenges (e.g., climate impacts on pineapple production in Eswatini), the domestic market remains a steady growth engine. RFG's focus on efficiency and product innovation—key themes in its recent reports—should help offset headwinds.

The Risk Factor

No investment is risk-free. RFG's analysis mentions one unspecified warning sign, which investors should probe further. Potential concerns could include:
- Geopolitical Risks: Exposure to international markets could amplify volatility.
- Tax Implications: Non-exempt shareholders face a 20% withholding tax, reducing net payouts.
- Valuation: The stock is currently 22% undervalued, per analysts, but further declines in earnings (if sustained) could pressure the share price.

The Bottom Line: Buy Before July 2

The combination of RFG's conservative payout ratios, robust earnings growth, and historically reliable dividends makes it a strong buy before the July 2 ex-dividend date. Even with the single warning sign, the fundamentals—sustainable cash flows, low debt, and a dividend yield poised to rise—outweigh the risks for income-focused investors.

Action Items:
1. Purchase shares by July 1 to qualify for the dividend.
2. Monitor the January 2026 dividend for further growth signals.
3. Assess the warning sign (if disclosed) for sector-specific or operational red flags.

In a market hungry for steady returns, RFG's blend of income and growth is hard to ignore. This could be the moment to “buy the dip” and secure a piece of a dividend machine.

Investment thesis: RFG's dividend is sustainable, its growth trajectory is intact, and the ex-dividend window offers a rare chance to lock in yield while positioning for future upside.