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 4.0%, which is an attractive boost to shareholder returns.

We've discovered 1 warning sign about Reynolds Consumer Products. View them for free.

Reynolds Consumer Products' Payment Could Potentially Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last dividend was quite easily covered by Reynolds Consumer Products' earnings. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 12.3%. If the dividend continues on this path, the payout ratio could be 57% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Reynolds Consumer Products

Reynolds Consumer Products Is Still Building Its Track Record

Reynolds Consumer Products' dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2020, the dividend has gone from $0.60 total annually to $0.92. This works out to be a compound annual growth rate (CAGR) of approximately 8.9% a year over that time. 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.

Reynolds Consumer Products May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. Earnings per share has been crawling upwards at 2.1% per year. Reynolds Consumer Products is struggling to find viable investments, so it is returning more to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

Our Thoughts On Reynolds Consumer Products' Dividend

Overall, we think Reynolds Consumer Products is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. 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. 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.