Richards Packaging Income Fund (TSE:RPI.UN) Is Due To Pay A Dividend Of CA$0.11

Richards Packaging Income Fund's (TSE:RPI.UN) investors are due to receive a payment of CA$0.11 per share on 14th of September. The dividend yield will be 4.3% based on this payment which is still above the industry average.

See our latest analysis for Richards Packaging Income Fund

Richards Packaging Income Fund's Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, prior to this announcement, Richards Packaging Income Fund's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 17.8% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 41%, which is in the range that makes us comfortable with the sustainability of the dividend.

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 2013, 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 Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Richards Packaging Income Fund has grown earnings per share at 18% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Richards Packaging Income Fund's prospects of growing its dividend payments in the future.

Richards Packaging Income Fund Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Richards Packaging Income Fund might even raise payments in the future. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

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. Taking the debate a bit further, we've identified 1 warning sign for Richards Packaging Income Fund that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield 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.