Reynolds Consumer Products (NASDAQ:REYN) Is Due To Pay A Dividend Of $0.23

The board of Reynolds Consumer Products Inc. (NASDAQ:REYN) has announced that it will pay a dividend of $0.23 per share on the 29th of November. This makes the dividend yield 3.1%, which will augment investor returns quite nicely.

See our latest analysis for Reynolds Consumer Products

Reynolds Consumer Products' Future Dividend Projections Appear Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Reynolds Consumer Products was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to expand by 14.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 53% by next year, which is in a pretty sustainable range.

Reynolds Consumer Products Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2019, the annual payment back then was $0.60, compared to the most recent full-year payment of $0.92. This implies that the company grew its distributions at a yearly rate of about 8.9% over that duration. The dividend has been growing as a reasonable rate, which we like. However, investors will probably want to see a longer track record before they consider Reynolds Consumer Products to be a consistent dividend paying stock.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. Earnings has been rising at 4.0% per annum over the last five years, which admittedly is a bit slow. Growth of 4.0% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

In Summary

Overall, we think Reynolds Consumer Products is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 3 warning signs for Reynolds Consumer Products that investors need to be conscious of moving forward. Is Reynolds Consumer Products not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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