Red Rock Resorts (NASDAQ:RRR) Is Due To Pay A Dividend Of $0.25

Red Rock Resorts, Inc. (NASDAQ:RRR) has announced that it will pay a dividend of $0.25 per share on the 30th of June. This means that the annual payment will be 2.2% of the current stock price, which is in line with the average for the industry.

See our latest analysis for Red Rock Resorts

Red Rock Resorts' Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. However, Red Rock Resorts' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to fall by 27.4%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 88%, which is definitely on the higher side.

Red Rock Resorts' Dividend Has Lacked Consistency

Looking back, Red Rock Resorts' dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. Since 2016, the dividend has gone from $0.40 total annually to $1.00. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year 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 29% per annum. 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.

Red Rock Resorts Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 3 warning signs for Red Rock Resorts (of which 1 shouldn't be ignored!) you should know about. 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.