DICK'S Sporting Goods, Inc. (NYSE:DKS) Passed Our Checks, And It's About To Pay A US$1.00 Dividend
It looks like DICK'S Sporting Goods, Inc. (NYSE:DKS) is about to go ex-dividend in the next four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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 16th of March will not receive the dividend, which will be paid on the 31st of March.
The company's next dividend payment will be US$1.00 per share. Last year, in total, the company distributed US$1.95 to shareholders. Last year's total dividend payments show that DICK'S Sporting Goods has a trailing yield of 1.3% on the current share price of $146.27. 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. As a result, readers should always check whether DICK'S Sporting Goods has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for DICK'S Sporting Goods
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. DICK'S Sporting Goods paid out just 15% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether DICK'S Sporting Goods generated enough free cash flow to afford its dividend. It distributed 29% 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see DICK'S Sporting Goods's earnings have been skyrocketing, up 33% per annum 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. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. DICK'S Sporting Goods has delivered 15% dividend growth per year on average over the past 10 years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
To Sum It Up
Has DICK'S Sporting Goods got what it takes to maintain its dividend payments? We love that DICK'S Sporting Goods 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 DICK'S Sporting Goods, and we would prioritise taking a closer look at it.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Our analysis shows 3 warning signs for DICK'S Sporting Goods that we strongly recommend you have a look at before investing in the company.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.
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