Readers hoping to buy Red Rock Resorts, Inc. (NASDAQ:RRR) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is one business day before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least one business day to settle. Thus, you can purchase Red Rock Resorts' shares before the 14th of May in order to receive the dividend, which the company will pay on the 21st of May.

The company's upcoming dividend is US$1.00 a share, following on from the last 12 months, when the company distributed a total of US$2.00 per share to shareholders. Calculating the last year's worth of payments shows that Red Rock Resorts has a trailing yield of 4.5% on the current share price of US$44.40. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Red Rock Resorts paying out a modest 38% of its earnings. A useful secondary check can be to evaluate whether Red Rock Resorts generated enough free cash flow to afford its dividend. Luckily it paid out just 24% of its free cash flow last year.

It's positive to see that Red Rock Resorts'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.

View our latest analysis for Red Rock Resorts

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.NasdaqGS:RRR Historic Dividend May 10th 2025

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Red Rock Resorts has grown its earnings rapidly, up 37% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

Story Continues

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past nine years, Red Rock Resorts has increased its dividend at approximately 20% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Should investors buy Red Rock Resorts for the upcoming dividend? Red Rock Resorts has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past nine years, but the conservative payout ratio makes the current dividend look sustainable. There's a lot to like about Red Rock Resorts, and we would prioritise taking a closer look at it.

While it's tempting to invest in Red Rock Resorts for the dividends alone, you should always be mindful of the risks involved. For example, we've found 2 warning signs for Red Rock Resorts (1 is a bit unpleasant!) that deserve your attention before investing in the shares.

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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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