The board of Caleres, Inc. (NYSE:CAL) has announced that it will pay a dividend on the 1st of October, with investors receiving US$0.07 per share. This means the annual payment will be 1.1% of the current stock price, which is lower than the industry average.
Caleres' Distributions May Be Difficult To Sustain
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Even though Caleres isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.
Over the next year, EPS might fall by 70.3% based on recent performance. This means that the company will be unprofitable, but cash flows are more important when considering the dividend and as the current cash payout ratio is pretty healthy, we don't think there is too much reason to worry.
Caleres Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The payments haven't really changed that much since 10 years ago. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.
The Dividend Has Limited Growth Potential
The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. Earnings per share has been sinking by 70% over the last five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.
Our Thoughts On Caleres' Dividend
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We don't think Caleres is a great stock to add to your portfolio if income is your focus.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Caleres that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.
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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