In This Article:
Reckitt Benckiser Group plc's (LON:RKT) dividend will be increasing from last year's payment of the same period to £1.22 on 29th of May. This makes the dividend yield 3.7%, which is above the industry average.
View our latest analysis for Reckitt Benckiser Group
Reckitt Benckiser Group's Projected Earnings Seem Likely To Cover Future Distributions
If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Reckitt Benckiser Group's profits didn't cover the dividend, but the company was generating enough cash instead. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.
The next year is set to see EPS grow by 92.1%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 52% which brings it into quite a comfortable range.
Reckitt Benckiser Group Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2015, the dividend has gone from £1.37 total annually to £2.02. This works out to be a compound annual growth rate (CAGR) of approximately 4.0% a year over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.
Reckitt Benckiser Group Might Find It Hard To Grow Its Dividend
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Reckitt Benckiser Group has seen EPS rising for the last five years, at 56% per annum. While EPS is growing rapidly, Reckitt Benckiser Group paid out a very high 99% of its income as dividends. If earnings continue to grow, this dividend may be sustainable, but we think a payout this high definitely bears watching.
In Summary
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We would probably look elsewhere for an income investment.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 3 warning signs for Reckitt Benckiser Group that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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.