Red Rock Resorts' (NASDAQ:RRR) Dividend Will Be $0.25

The board of Red Rock Resorts, Inc. (NASDAQ:RRR) has announced that it will pay a dividend on the 30th of September, with investors receiving $0.25 per share. The dividend yield is 1.8% based on this payment, which is a little bit low compared to the other companies in the industry.

See our latest analysis for Red Rock Resorts

Red Rock Resorts' Payment Has Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Red Rock Resorts is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS is forecast to fall by 8.4%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 90%, which is definitely on the higher side.

Red Rock Resorts' Dividend Has Lacked Consistency

Red Rock Resorts has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The dividend has gone from an annual total of $0.40 in 2016 to the most recent total annual payment of $1.00. This means that it has been growing its distributions at 12% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Red Rock Resorts has seen EPS rising for the last five years, at 45% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Red Rock Resorts' payments, as there could be some issues with sustaining them into the future. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for Red Rock Resorts (1 is potentially serious!) that you should be aware of before investing. Is Red Rock Resorts not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com