Regal Rexnord (NYSE:RRX) Has Affirmed Its Dividend Of $0.35

Regal Rexnord Corporation's (NYSE:RRX) investors are due to receive a payment of $0.35 per share on 13th of October. This payment means the dividend yield will be 0.9%, which is below the average for the industry.

See our latest analysis for Regal Rexnord

Regal Rexnord's Earnings Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, prior to this announcement, Regal Rexnord'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.

According to analysts, EPS should be several times higher next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 13%, which makes us pretty comfortable with the sustainability of the dividend.

Regal Rexnord Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.76 in 2013 to the most recent total annual payment of $1.40. This implies that the company grew its distributions at a yearly rate of about 6.3% over that duration. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

Dividend Growth May Be Hard To Come By

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. It's not great to see that Regal Rexnord's earnings per share has fallen at approximately 7.1% per year over the past five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

Our Thoughts On Regal Rexnord's Dividend

Overall, a consistent dividend is a good thing, and we think that Regal Rexnord has the ability to continue this into the future. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. To that end, Regal Rexnord has 2 warning signs (and 1 which can't be ignored) we think you should know about. Is Regal Rexnord not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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