Reckitt Benckiser Group (LON:RKT) Has Re-Affirmed Its Dividend Of UK£1.02
Reckitt Benckiser Group plc's (LON:RKT) investors are due to receive a payment of UK£1.02 per share on 9th of June. This means the annual payment is 3.0% of the current stock price, which is above the average for the industry.
See our latest analysis for Reckitt Benckiser Group
Reckitt Benckiser Group Might Find It Hard To Continue The Dividend
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Reckitt Benckiser Group is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. This gives us some comfort about the level of the dividend payments.
Looking forward, earnings per share could 43.4% over the next year if the trend of the last few years can't be broken. This means that the company won't turn a profit over the next year, but with healthy cash flows at the moment the dividend could still be okay to continue.
Reckitt Benckiser Group Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The first annual payment during the last 10 years was UK£1.15 in 2012, and the most recent fiscal year payment was UK£1.75. This implies that the company grew its distributions at a yearly rate of about 4.3% over that duration. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.
The Dividend Has Limited Growth Potential
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. Reckitt Benckiser Group's earnings per share has shrunk at 43% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.
In Summary
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We would be a touch cautious of relying on this stock primarily for the dividend income.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Reckitt Benckiser Group has 2 warning signs (and 1 which is concerning) we think you should know about. Is Reckitt Benckiser Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
