Reckitt Benckiser Group's (LON:RKT) Dividend Will Be UK£1.02

By
Simply Wall St
Published
April 17, 2022
LSE:RKT
Source: Shutterstock

The board of Reckitt Benckiser Group plc (LON:RKT) has announced that it will pay a dividend of UK£1.02 per share on the 9th of June. This makes the dividend yield 2.9%, which will augment investor returns quite nicely.

See our latest analysis for Reckitt Benckiser Group

Reckitt Benckiser Group's Distributions May Be Difficult To Sustain

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. While Reckitt Benckiser Group is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. 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 won't turn a profit over the next year, but with healthy cash flows at the moment the dividend could still be okay to continue.

historic-dividend
LSE:RKT Historic Dividend April 17th 2022

Reckitt Benckiser Group Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from UK£1.15 in 2012 to the most recent annual 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.

Dividend Growth Potential Is Shaky

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. 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. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

In Summary

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. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for Reckitt Benckiser Group you should be aware of, and 1 of them makes us a bit uncomfortable. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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