The board of DICK’S Sporting Goods, Inc. (NYSE: DKS) has announced that it will increase its dividend to $ 5.94 on September 24th. This will increase the dividend yield from 1.3% to 5.0%, which gives a nice boost to shareholder returns.
While the dividend yield is important for income investors, it’s also important to factor in large price movements as these generally outweigh any gains from distributions. Investors will be pleased that the DICK’S Sporting Goods share price is up 42% in the past 3 months, which is good for shareholders and may also explain a decline in the dividend yield.
Check out our latest analysis for DICK’S Sporting Goods
DICK’S Sporting Goods revenue slightly covers the distributions
Impressive dividend yields are good, but don’t mind if payments can’t be sustained. However, the result of DICK’S Sporting Goods easily covers the dividend. As a result, much of the revenue was reinvested in the company.
A decline in EPS of 26.6% is forecast for the next year. If the dividend is in line with recent trends, we estimate the payout ratio at 75%, which we think is quite comfortable, with most of the company’s profits left for the company’s future growth.
NYSE: DKS Historic Dividend August 30, 2021
The company has a long dividend balance sheet, but it’s not looking good with cuts in the past. The first annual payment in the past 10 years was $ 0.50 in 2011 and the last payment for the fiscal year was $ 1.75. This means the company increased its payouts at an annual rate of around 13% over that period. Dividends have risen rapidly during this time, but with cuts in the past, we’re not sure this stock will be a reliable source of income going forward.
The dividend is likely to go up
With a relatively unstable dividend, it’s even more important to assess whether earnings per share are growing, which could indicate a future dividend hike. We’re excited that DICK’S Sporting Goods has increased earnings per share by 39% per year over the past five years. Earnings per share are growing solidly and the payout ratio is low, which we think is an ideal combination in a dividend stock as the company can easily increase dividends going forward.
DICK’S Sporting Goods looks like a great dividend stock
In summary, it is always positive to see that the dividend is being increased, and we are particularly pleased with its sustainability as a whole. The income easily covers the company’s distributions and the company generates a lot of money. Should earnings decline over the next 12 months, the dividend could falter a bit, but we think this shouldn’t be too much of a problem in the long run. With all of this in mind, this could be a good dividend opportunity.
Companies with stable dividend policies are likely to enjoy greater investor interest than those that suffer from a more inconsistent approach. Still, investors need to consider a variety of factors in addition to dividend payments when analyzing a company. Case in point: we have discovered 2 warning signs for DICK’S Sporting Goods (1 of which is potentially serious!) that you should know about. If you’re a dividend investor, you might want ours too curated list of high performing dividend stocks.
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