Red Rock Resorts (NASDAQ:RRR) Is Paying Out A Dividend Of $0.25

Red Rock Resorts, Inc. (NASDAQ:RRR) will pay a dividend of $0.25 on the 28th of June. Based on this payment, the dividend yield will be 2.0%, which is fairly typical for the industry.

See our latest analysis for Red Rock Resorts

Red Rock Resorts Doesn't Earn Enough To Cover Its Payments

Solid dividend yields are great, but they only really help us if the payment is sustainable. Based on the last payment, Red Rock Resorts was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share is forecast to fall by 21.9% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 103%, which could put the dividend under pressure if earnings don't start to improve.

Red Rock Resorts' Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2016, the annual payment back then was $0.40, compared to the most recent full-year 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

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Red Rock Resorts has seen EPS rising for the last five years, at 12% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Red Rock Resorts' prospects of growing its dividend payments in the future.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for Red Rock Resorts (of which 1 is potentially serious!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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.