- Oops!Something went wrong.Please try again later.
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Weis Markets, Inc. (NYSE:WMK) is about to trade ex-dividend in the next 2 days. This means that investors who purchase shares on or after the 14th of February will not receive the dividend, which will be paid on the 3rd of March.
Weis Markets's next dividend payment will be US$0.31 per share, on the back of last year when the company paid a total of US$1.24 to shareholders. Calculating the last year's worth of payments shows that Weis Markets has a trailing yield of 3.3% on the current share price of $37.96. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Weis Markets is paying out an acceptable 54% of its profit, a common payout level among most companies. 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. Thankfully its dividend payments took up just 45% of the free cash flow it generated, which is a comfortable payout ratio.
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.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. So we're not too excited that Weis Markets's earnings are down 3.2% a year over the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Weis Markets has delivered an average of 0.7% per year annual increase in its dividend, based on the past ten years of dividend payments.
To Sum It Up
Should investors buy Weis Markets for the upcoming dividend? The payout ratios are within a reasonable range, implying the dividend may be sustainable. Declining earnings are a serious concern, however, and could pose a threat to the dividend in future. To summarise, Weis Markets looks okay on this analysis, although it doesn't appear a stand-out opportunity.
Keen to explore more data on Weis Markets's financial performance? Check out our visualisation of its historical revenue and earnings growth.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.