Yahoo Finance Regal Rexnord (NYSE:RRX) Has Announced A Dividend Of $0.35
The board of Regal Rexnord Corporation (NYSE:RRX) has announced that it will pay a dividend of $0.35 per share on the 12th of July. This means the annual payment will be 1.0% of the current stock price, which is lower than the industry average.
See our latest analysis for Regal Rexnord
Regal Rexnord's Dividend Is Well Covered By Earnings
If it is predictable over a long period, even low dividend yields can be attractive. Regal Rexnord is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. This gives us some comfort about the level of the dividend payments.
According to analysts, EPS should be several times higher next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 43%, which makes us pretty comfortable with the sustainability of the dividend.
Regal Rexnord Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the dividend has gone from $0.80 total annually to $1.40. This works out to be a compound annual growth rate (CAGR) of approximately 5.8% a year over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.
The Dividend Has Limited Growth Potential
Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. Regal Rexnord's EPS has fallen by approximately 18% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. 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.
Our Thoughts On Regal Rexnord's Dividend
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Regal Rexnord's payments, as there could be some issues with sustaining them into the future. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We don't think Regal Rexnord is a great stock to add to your portfolio if income is your focus.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Regal Rexnord that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
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