Richards Packaging Income Fund (TSE:RPI.UN) Is Paying Out A Dividend Of CA$0.11

The board of Richards Packaging Income Fund (TSE:RPI.UN) has announced that it will pay a dividend of CA$0.11 per share on the 14th of December. Based on this payment, the dividend yield on the company's stock will be 2.9%, which is an attractive boost to shareholder returns.

Check out the opportunities and risks within the CA Packaging industry.

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. The last payment made up 78% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.

EPS is set to grow by 5.6% over the next year if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could reach 116%, which probably can't continue without starting to put some pressure on the balance sheet.

Richards Packaging Income Fund Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2012, the dividend has gone from CA$0.786 total annually to CA$1.32. This implies that the company grew its distributions at a yearly rate of about 5.3% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

We Could See Richards Packaging Income Fund's Dividend Growing

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Richards Packaging Income Fund has impressed us by growing EPS at 5.6% per year over the past five years. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.

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 has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 3 warning signs for Richards Packaging Income Fund that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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