PriceSmart (NASDAQ:PSMT) Is Increasing Its Dividend To $0.46
PriceSmart, Inc. (NASDAQ:PSMT) has announced that it will be increasing its periodic dividend on the 28th of February to $0.46, which will be 7.0% higher than last year's comparable payment amount of $0.43. This takes the annual payment to 1.2% of the current stock price, which unfortunately is below what the industry is paying.
See our latest analysis for PriceSmart
PriceSmart's Dividend Is Well Covered By Earnings
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, PriceSmart's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.
Looking forward, earnings per share is forecast to rise by 12.9% over the next year. If the dividend continues on this path, the payout ratio could be 23% by next year, which we think can be pretty sustainable going forward.
PriceSmart Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was $0.60 in 2013, and the most recent fiscal year payment was $0.86. This implies that the company grew its distributions at a yearly rate of about 3.7% over that duration. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.
PriceSmart May Find It Hard To Grow The Dividend
The company's investors will be pleased to have been receiving dividend income for some time. Earnings have grown at around 3.5% a year for the past five years, which isn't massive but still better than seeing them shrink. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.
PriceSmart Looks Like A Great Dividend Stock
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. 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 PriceSmart that investors need to be conscious of moving forward. Is PriceSmart not quite the opportunity you were looking for? Why not check out our selection of top 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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