Regal Rexnord Corporation (NYSE:RRX) has announced that it will pay a dividend of $0.35 per share on the 13th of October. This payment means the dividend yield will be 0.9%, which is below the average for the industry.
Check out our latest analysis for Regal Rexnord
Regal Rexnord's Dividend Is Well Covered By Earnings
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, Regal Rexnord was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.
Over the next year, EPS is forecast to expand by 99.9%. If the dividend continues on this path, the payout ratio could be 14% by next year, which we think can be pretty sustainable going forward.
Regal Rexnord Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2013, the annual payment back then was $0.76, compared to the most recent full-year payment of $1.40. This means that it has been growing its distributions at 6.3% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.
Dividend Growth May Be Hard To Achieve
Investors could be attracted to the stock based on the quality of its payment history. However, Regal Rexnord's EPS was effectively flat over the past five years, which could stop the company from paying more every year. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.
Regal Rexnord Looks Like A Great Dividend Stock
Overall, we like to see the dividend staying consistent, and we think Regal Rexnord might even raise payments in the future. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.
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. For example, we've picked out 1 warning sign for Regal Rexnord that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.