Richards Packaging Income Fund (TSE:RPI.UN) Has Re-Affirmed Its Dividend Of CA$0.11

Richards Packaging Income Fund (TSE:RPI.UN) has announced that it will pay a dividend of CA$0.11 per share on the 13th of May. The dividend yield will be 4.3% based on this payment which is still above the industry average.

View our latest analysis for Richards Packaging Income Fund

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

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, the company was paying out 713% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 27%. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

If the company can't turn things around, EPS could fall by 23.7% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 1,478%, which could put the dividend under pressure if earnings don't start to improve.

Richards Packaging Income Fund Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from CA$0.79 in 2012 to the most recent annual payment of CA$1.32. This works out to be a compound annual growth rate (CAGR) of approximately 5.3% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

The Dividend Has Limited Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. Over the past five years, it looks as though Richards Packaging Income Fund's EPS has declined at around 24% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

Our Thoughts On Richards Packaging Income Fund's Dividend

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 is generating plenty of cash, but we still think the dividend is a bit high for comfort. We don't think Richards Packaging Income Fund is a great stock to add to your portfolio if income is your focus.

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. As an example, we've identified 3 warning signs for Richards Packaging Income Fund that you should be aware of before investing. 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.