PriceSmart, Inc.'s (NASDAQ:PSMT) dividend will be increasing from last year's payment of the same period to $0.46 on 31st of August. Despite this raise, the dividend yield of 1.3% is only a modest boost to shareholder returns.
PriceSmart's Payment Has Solid Earnings Coverage
If it is predictable over a long period, even low dividend yields can be attractive. However, PriceSmart's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Over the next year, EPS is forecast to expand by 11.2%. If the dividend continues on this path, the payout ratio could be 25% by next year, which we think can be pretty sustainable going forward.
PriceSmart Has A Solid Track Record
The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $0.60 in 2013, and the most recent fiscal year payment was $0.92. This implies that the company grew its distributions at a yearly rate of about 4.4% over that duration. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.
PriceSmart Could Grow Its Dividend
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. PriceSmart has seen EPS rising for the last five years, at 6.9% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for PriceSmart's prospects of growing its dividend payments in the future.
PriceSmart Looks Like A Great Dividend Stock
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for PriceSmart that investors should take into consideration. 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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