Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Red Rock Resorts Inc (NASDAQ:RRR) has recently paid dividends to shareholders, and currently yields 1.3%. Let’s dig deeper into whether Red Rock Resorts should have a place in your portfolio.
Here’s how I find good dividend stocks
When researching a dividend stock, I always follow the following screening criteria:
- Is it paying an annual yield above 75% of dividend payers?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has dividend per share amount increased over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Will it have the ability to keep paying its dividends going forward?
Does Red Rock Resorts pass our checks?
Red Rock Resorts has a trailing twelve-month payout ratio of 15.7%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 20.8%, leading to a dividend yield of 1.3%. However, EPS is forecasted to fall to $1.87 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. The reality is that it is too early to consider Red Rock Resorts as a dividend investment. It has only been consistently paying dividends for 2 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, Red Rock Resorts generates a yield of 1.3%, which is on the low-side for Hospitality stocks.
Now you know to keep in mind the reason why investors should be careful investing in Red Rock Resorts for the dividend. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I’ve put together three pertinent aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for RRR’s future growth? Take a look at our free research report of analyst consensus for RRR’s outlook.
- Valuation: What is RRR worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether RRR is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.