Reckitt Benckiser Group (LON:RKT) Will Pay A Dividend Of UK£1.02

The board of Reckitt Benckiser Group plc (LON:RKT) has announced that it will pay a dividend on the 9th of June, with investors receiving UK£1.02 per share. This makes the dividend yield 3.0%, which will augment investor returns quite nicely.

View our latest analysis for Reckitt Benckiser Group

Reckitt Benckiser Group Might Find It Hard To Continue The Dividend

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Even though Reckitt Benckiser Group isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. This gives us some comfort about the level of the dividend payments.

Looking forward, earnings per share could 43.4% over the next year if the trend of the last few years can't be broken. This means that the company will be unprofitable, but cash flows are more important when considering the dividend and as the current cash payout ratio is pretty healthy, we don't think there is too much reason to worry.

Reckitt Benckiser Group Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2012, the first annual payment was UK£1.15, compared to the most recent full-year payment of UK£1.75. This works out to be a compound annual growth rate (CAGR) of approximately 4.3% a year over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

The Dividend Has Limited Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. Over the past five years, it looks as though Reckitt Benckiser Group's EPS has declined at around 43% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

Our Thoughts On Reckitt Benckiser Group's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Reckitt Benckiser Group's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. 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. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for Reckitt Benckiser Group you should be aware of, and 1 of them is a bit unpleasant. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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