Red Rock Resorts, Inc. (NASDAQ:RRR) Passed Our Checks, And It's About To Pay A US$1.00 Dividend

Red Rock Resorts, Inc. (NASDAQ:RRR) stock is about to trade ex-dividend in 3 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase Red Rock Resorts' shares on or after the 21st of February, you won't be eligible to receive the dividend, when it is paid on the 4th of March.

The company's next dividend payment will be US$1.00 per share, on the back of last year when the company paid a total of US$1.00 to shareholders. Last year's total dividend payments show that Red Rock Resorts has a trailing yield of 1.7% on the current share price of US$58.50. If you buy this business for its dividend, you should have an idea of whether Red Rock Resorts's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Red Rock Resorts

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. That's why it's good to see Red Rock Resorts paying out a modest 33% of its earnings. Red Rock Resorts paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Red Rock Resorts earnings per share are up 5.9% per annum over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Red Rock Resorts has delivered an average of 12% per year annual increase in its dividend, based on the past eight years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Has Red Rock Resorts got what it takes to maintain its dividend payments? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. Overall, Red Rock Resorts looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

In light of that, while Red Rock Resorts has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 2 warning signs for Red Rock Resorts (of which 1 doesn't sit too well with us!) you should know about.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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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.