Regal Beloit (NYSE:RBC) Is Increasing Its Dividend To US$0.33

By
Simply Wall St
Published
July 29, 2021
NYSE:RRX
Source: Shutterstock

Regal Beloit Corporation (NYSE:RBC) has announced that it will be increasing its dividend on the 15th of October to US$0.33. Despite this raise, the dividend yield of 0.9% is only a modest boost to shareholder returns.

Check out our latest analysis for Regal Beloit

Regal Beloit's Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, prior to this announcement, Regal Beloit'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.

The next year is set to see EPS grow by 43.3%. If the dividend continues on this path, the payout ratio could be 18% by next year, which we think can be pretty sustainable going forward.

historic-dividend
NYSE:RBC Historic Dividend July 30th 2021

Regal Beloit 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. The dividend has gone from US$0.68 in 2011 to the most recent annual payment of US$1.32. This works out to be a compound annual growth rate (CAGR) of approximately 6.9% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Regal Beloit Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Regal Beloit has grown earnings per share at 9.2% per year over the past five years. Regal Beloit definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Regal Beloit's Dividend

Overall, a dividend increase is always good, and we think that Regal Beloit is a strong income stock thanks to its track record and growing earnings. 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 Regal Beloit that investors need to be conscious of moving forward. We have also put together a list of global stocks with a solid dividend.

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