Reynolds Consumer Products (NASDAQ:REYN) Has Affirmed Its Dividend Of $0.23

Reynolds Consumer Products Inc. (NASDAQ:REYN) will pay a dividend of $0.23 on the 30th of May. Based on this payment, the dividend yield on the company's stock will be 3.9%, which is an attractive boost to shareholder returns.

Our free stock report includes 1 warning sign investors should be aware of before investing in Reynolds Consumer Products. Read for free now.

Reynolds Consumer Products' Projected Earnings Seem Likely To Cover Future Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last dividend was quite easily covered by Reynolds Consumer Products' earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

The next year is set to see EPS grow by 5.8%. Assuming the dividend continues along recent trends, we think the payout ratio could be 58% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Reynolds Consumer Products

Reynolds Consumer Products Doesn't Have A Long Payment History

It is great to see that Reynolds Consumer Products has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2020, the dividend has gone from $0.60 total annually to $0.92. This implies that the company grew its distributions at a yearly rate of about 8.9% over that duration. Reynolds Consumer Products has a nice track record of dividend growth but we would wait until we see a longer track record before getting too confident.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. Earnings has been rising at 3.0% per annum over the last five years, which admittedly is a bit slow. Reynolds Consumer Products is struggling to find viable investments, so it is returning more to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

Our Thoughts On Reynolds Consumer Products' Dividend

Overall, a consistent dividend is a good thing, and we think that Reynolds Consumer Products has the ability to continue this into the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Reynolds Consumer Products that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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