Red Rock Resorts (NASDAQ:RRR) Is Due To Pay A Dividend Of $0.25
Red Rock Resorts, Inc. (NASDAQ:RRR) will pay a dividend of $0.25 on the 31st of March. This means that the annual payment will be 2.1% of the current stock price, which is in line with the average for the industry.
See our latest analysis for Red Rock Resorts
Red Rock Resorts' Payment Has Solid Earnings Coverage
We aren't too impressed by dividend yields unless they can be sustained over time. However, Red Rock Resorts' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Looking forward, earnings per share is forecast to fall by 32.2% over the next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 88% in the next 12 months, which is on the higher end of the range we would say is sustainable.
Red Rock Resorts' Dividend Has Lacked Consistency
Even in its relatively short history, the company has reduced the dividend at least once. This makes us cautious about the consistency of the dividend over a full economic cycle. The annual payment during the last 6 years was $0.40 in 2017, and the most recent fiscal year payment was $1.00. This works out to be a compound annual growth rate (CAGR) of approximately 16% a year over that time. Red Rock Resorts has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.
The Dividend Looks Likely To Grow
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Red Rock Resorts has impressed us by growing EPS at 47% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.
Red Rock Resorts Looks Like A Great Dividend Stock
In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for Red Rock Resorts (of which 1 makes us a bit uncomfortable!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
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