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Marriott Vacations Worldwide (NYSE:VAC) Will Pay A Larger Dividend Than Last Year At $0.76

The board of Marriott Vacations Worldwide Corporation (NYSE:VAC) has announced that the dividend on 4th of January will be increased to $0.76, which will be 5.6% higher than last year's payment of $0.72 which covered the same period. This will take the annual payment to 3.5% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Marriott Vacations Worldwide

Marriott Vacations Worldwide's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Marriott Vacations Worldwide was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 56.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 24% by next year, which is in a pretty sustainable range.

historic-dividend
historic-dividend

Marriott Vacations Worldwide's Dividend Has Lacked Consistency

Marriott Vacations Worldwide has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The dividend has gone from an annual total of $1.00 in 2014 to the most recent total annual payment of $2.88. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Marriott Vacations Worldwide has impressed us by growing EPS at 13% per year over the past five years. Marriott Vacations Worldwide definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Marriott Vacations Worldwide's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Marriott Vacations Worldwide (1 is a bit unpleasant!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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