Reynolds Consumer Products (NASDAQ:REYN) Will Pay A Dividend Of $0.23
The board of Reynolds Consumer Products Inc. (NASDAQ:REYN) has announced that it will pay a dividend of $0.23 per share on the 31st of August. This means the annual payment is 3.1% of the current stock price, which is above the average for the industry.
See our latest analysis for Reynolds Consumer Products
Reynolds Consumer Products' Dividend Is Well Covered By Earnings
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Reynolds Consumer Products' dividend was only 64% of earnings, however it was paying out 111% of free cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.
The next year is set to see EPS grow by 30.1%. If the dividend continues on this path, the payout ratio could be 49% by next year, which we think can be pretty sustainable going forward.
Reynolds Consumer Products Is Still Building Its Track Record
The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The dividend has gone from an annual total of $0.60 in 2020 to the most recent total annual payment of $0.92. This implies that the company grew its distributions at a yearly rate of about 24% over that duration. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.
The Dividend Has 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. We are encouraged to see that Reynolds Consumer Products has grown earnings per share at 8.3% per year over the past three years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.
Our Thoughts On Reynolds Consumer Products' Dividend
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Reynolds Consumer Products' payments, as there could be some issues with sustaining them into the future. While Reynolds Consumer Products is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. To that end, Reynolds Consumer Products has 3 warning signs (and 1 which is potentially serious) we think you should know about. Is Reynolds Consumer Products not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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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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