Red Rock Resorts (NASDAQ:RRR) Has Announced A Dividend Of $0.25

Red Rock Resorts, Inc.'s (NASDAQ:RRR) investors are due to receive a payment of $0.25 per share on 31st of March. This payment means that the dividend yield will be 2.1%, which is around the industry average.

Check out our latest analysis for Red Rock Resorts

Red Rock Resorts' Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. However, prior to this announcement, Red Rock Resorts' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to fall by 32.2% over the next year. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 88%, meaning that most of the company's earnings are being paid out to shareholders.

Red Rock Resorts' Dividend Has Lacked Consistency

Looking back, Red Rock Resorts' dividend hasn't been particularly consistent. 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 2017 to the most recent total annual payment of $1.00. This works out to be a compound annual growth rate (CAGR) of approximately 16% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Red Rock Resorts has impressed us by growing EPS at 47% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like Red Rock Resorts' Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The earnings easily cover the company's distributions, and the company is generating plenty of cash. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for Red Rock Resorts you should be aware of, and 1 of them makes us a bit uncomfortable. Is Red Rock Resorts not quite the opportunity you were looking for? Why not check out 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.