Yahoo Finance There's A Lot To Like About DICK'S Sporting Goods' (NYSE:DKS) Upcoming US$1.10 Dividend
It looks like DICK'S Sporting Goods, Inc. (NYSE:DKS) is about to go ex-dividend in the next 4 days. 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 important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, DICK'S Sporting Goods investors that purchase the stock on or after the 14th of June will not receive the dividend, which will be paid on the 28th of June.
The company's next dividend payment will be US$1.10 per share. Last year, in total, the company distributed US$4.40 to shareholders. Based on the last year's worth of payments, DICK'S Sporting Goods has a trailing yield of 2.0% on the current stock price of US$219.05. If you buy this business for its dividend, you should have an idea of whether DICK'S Sporting Goods's dividend is reliable and sustainable. So we need to investigate whether DICK'S Sporting Goods can afford its dividend, and if the dividend could grow.
See our latest analysis for DICK'S Sporting Goods
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. Fortunately DICK'S Sporting Goods's payout ratio is modest, at just 33% of profit. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It distributed 30% of its free cash flow as dividends, a comfortable payout level for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see DICK'S Sporting Goods's earnings have been skyrocketing, up 31% per annum for the past five years. DICK'S Sporting Goods is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. 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.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, DICK'S Sporting Goods has lifted its dividend by approximately 24% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
The Bottom Line
Is DICK'S Sporting Goods an attractive dividend stock, or better left on the shelf? DICK'S Sporting Goods has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. DICK'S Sporting Goods looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Every company has risks, and we've spotted 1 warning sign for DICK'S Sporting Goods you should know about.
If you're in the market for strong dividend payers, we recommend checking 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.
