Reynolds Consumer Products Inc. (NASDAQ:REYN) stock is about to trade ex-dividend in four days. The ex-dividend date is usually set to be one business day before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves a full business day. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Reynolds Consumer Products' shares before the 16th of May in order to be eligible for the dividend, which will be paid on the 30th of May.

The company's next dividend payment will be US$0.23 per share. Last year, in total, the company distributed US$0.92 to shareholders. Looking at the last 12 months of distributions, Reynolds Consumer Products has a trailing yield of approximately 4.0% on its current stock price of US$23.10. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Reynolds Consumer Products can afford its dividend, and if the dividend could grow.

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Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Reynolds Consumer Products paid out 58% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Reynolds Consumer Products generated enough free cash flow to afford its dividend. Over the last year it paid out 61% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Reynolds Consumer Products's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Check out our latest analysis for Reynolds Consumer Products

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.NasdaqGS:REYN Historic Dividend May 11th 2025

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend. It's not encouraging to see that Reynolds Consumer Products's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

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Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last five years, Reynolds Consumer Products has lifted its dividend by approximately 8.9% a year on average.

To Sum It Up

From a dividend perspective, should investors buy or avoid Reynolds Consumer Products? Earnings per share have barely grown, and although Reynolds Consumer Products paid out over half its earnings and free cash flow last year, the payout ratios are within a normal range for most companies. To summarise, Reynolds Consumer Products looks okay on this analysis, although it doesn't appear a stand-out opportunity.

If you want to look further into Reynolds Consumer Products, it's worth knowing the risks this business faces. For example, we've found 1 warning sign for Reynolds Consumer Products that we recommend you consider before investing in the business.

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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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