Richards Packaging Income Fund (TSE:RPI.UN) Has Announced A Dividend Of CA$0.11

The board of Richards Packaging Income Fund (TSE:RPI.UN) has announced that it will pay a dividend on the 14th of October, with investors receiving CA$0.11 per share. The dividend yield will be 3.0% based on this payment which is still above the industry average.

See our latest analysis for Richards Packaging Income Fund

Richards Packaging Income Fund Doesn't Earn Enough To Cover Its Payments

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Richards Packaging Income Fund's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

Looking forward, EPS could fall by 3.6% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 219%, which is definitely a bit high to be sustainable going forward.

Richards Packaging Income Fund Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2012, the annual payment back then was CA$0.786, compared to the most recent full-year payment of CA$1.32. This implies that the company grew its distributions at a yearly rate of about 5.3% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. Richards Packaging Income Fund has seen earnings per share falling at 3.6% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

Our Thoughts On Richards Packaging Income Fund's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. 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. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 4 warning signs for Richards Packaging Income Fund that investors should know about before committing capital to this stock. Is Richards Packaging Income Fund not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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