V.F. Corporation (NYSE:VFC) is about to trade ex-dividend in the next 4 days. You can purchase shares before the 9th of September in order to receive the dividend, which the company will pay on the 20th of September.
V.F's next dividend payment will be US$0.43 per share. Last year, in total, the company distributed US$2.04 to shareholders. Based on the last year's worth of payments, V.F has a trailing yield of 2.1% on the current stock price of $80.95. If you buy this business for its dividend, you should have an idea of whether V.F's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. V.F paid out 61% of its earnings to investors last year, a normal payout level for most businesses. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Over the last year, it paid out more than three-quarters (76%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.
It's positive to see that V.F's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at V.F, with earnings per share up 3.0% on average over the last five years. A high payout ratio of 61% generally happens when a company can't find better uses for the cash. Combined with slim earnings growth in the past few years, V.F could be signalling that its future growth prospects are thin.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, V.F has lifted its dividend by approximately 11% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
From a dividend perspective, should investors buy or avoid V.F? Earnings per share have been growing modestly and V.F paid out a bit over half of its earnings and free cash flow last year. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of V.F's dividend merits.
Ever wonder what the future holds for V.F? See what the 23 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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