Regal Rexnord (NYSE:RRX) Has Announced A Dividend Of $0.35

Regal Rexnord Corporation's (NYSE:RRX) investors are due to receive a payment of $0.35 per share on 12th of April. The dividend yield is 0.8% based on this payment, which is a little bit low compared to the other companies in the industry.

View our latest analysis for Regal Rexnord

Regal Rexnord's Earnings Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive. While Regal Rexnord 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.

According to analysts, EPS should be several times higher next year. If the dividend continues along recent trends, we estimate the payout ratio will be 63%, so there isn't too much pressure on the dividend.

Regal Rexnord Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $0.80 in 2014, and the most recent fiscal year payment was $1.40. This means that it has been growing its distributions at 5.8% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

The Dividend Has Limited Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Regal Rexnord's earnings per share has shrunk at 12% a year over the past five years. 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. 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 becomes a long term trend.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Regal Rexnord that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.