Reynolds Consumer Products (NASDAQ:REYN) Will Pay A Dividend Of $0.23

Reynolds Consumer Products Inc.'s (NASDAQ:REYN) investors are due to receive a payment of $0.23 per share on 31st of August. Based on this payment, the dividend yield on the company's stock will be 3.3%, which is an attractive boost to shareholder returns.

View our latest analysis for Reynolds Consumer Products

Reynolds Consumer Products' Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. At the time of the last dividend payment, Reynolds Consumer Products was paying out a very large proportion of what it was earning and 96% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

The next year is set to see EPS grow by 55.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 64%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Reynolds Consumer Products Is Still Building Its Track Record

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. Since 2020, the dividend has gone from $0.60 total annually to $0.92. This means that it has been growing its distributions at 15% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Has Limited Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. Reynolds Consumer Products' EPS has fallen by approximately 10% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

Reynolds Consumer Products' Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The track record isn't great, and the payments are a bit high to be considered sustainable. Overall, we don't think this company has the makings of a good income stock.

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. Case in point: We've spotted 2 warning signs for Reynolds Consumer Products (of which 1 is a bit concerning!) you should know about. 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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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.