Yahoo Finance Why You Might Be Interested In Dillard's, Inc. (NYSE:DDS) For Its Upcoming Dividend
Dillard's, Inc. (NYSE:DDS) stock is about to trade ex-dividend in 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Meaning, you will need to purchase Dillard's' shares before the 27th of March to receive the dividend, which will be paid on the 6th of May.
The company's next dividend payment will be US$0.25 per share, on the back of last year when the company paid a total of US$21.00 to shareholders. Based on the last year's worth of payments, Dillard's has a trailing yield of 4.7% on the current stock price of US$447.21. 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! As a result, readers should always check whether Dillard's has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Dillard's
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Dillard's has a low and conservative payout ratio of just 2.0% of its income after tax. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 45% 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?
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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Dillard's has grown its earnings rapidly, up 49% 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.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Dillard's has delivered an average of 59% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
To Sum It Up
From a dividend perspective, should investors buy or avoid Dillard's? We love that Dillard's is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. There's a lot to like about Dillard's, and we would prioritise taking a closer look at it.
In light of that, while Dillard's has an appealing dividend, it's worth knowing the risks involved with this stock. Be aware that Dillard's is showing 2 warning signs in our investment analysis, and 1 of those makes us a bit uncomfortable...
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.
