Reckitt Benckiser Group (LON:RKT) Has Announced A Dividend Of UK£1.02

The board of Reckitt Benckiser Group plc (LON:RKT) has announced that it will pay a dividend on the 9th of June, with investors receiving UK£1.02 per share. Based on this payment, the dividend yield will be 2.8%, which is fairly typical for the industry.

See our latest analysis for Reckitt Benckiser Group

Reckitt Benckiser Group's Distributions May Be Difficult To Sustain

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. While Reckitt Benckiser Group is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

Looking forward, earnings per share could 43.4% over the next year if the trend of the last few years can't be broken. This means that the company will be unprofitable, but cash flows are more important when considering the dividend and as the current cash payout ratio is pretty healthy, we don't think there is too much reason to worry.

Reckitt Benckiser Group Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the first annual payment was UK£1.15, compared to the most recent full-year payment of UK£1.75. This means that it has been growing its distributions at 4.3% per annum over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend Has Limited Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Reckitt Benckiser Group's earnings per share has shrunk at 43% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Our Thoughts On Reckitt Benckiser Group's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. 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. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for Reckitt Benckiser Group you should be aware of, and 1 of them is potentially serious. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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.