Shutterstock, Inc. (NYSE:SSTK) will increase its dividend on the 16th of March to $0.27, which is 13% higher than last year's payment from the same period of $0.24. This takes the dividend yield to 1.2%, which shareholders will be pleased with.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Shutterstock's stock price has increased by 72% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
Shutterstock's Earnings Easily Cover The Distributions
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Shutterstock was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.
Looking forward, earnings per share is forecast to rise by 24.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 37%, which is in the range that makes us comfortable with the sustainability of the dividend.
Shutterstock Is Still Building Its Track Record
The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. Since 2020, the annual payment back then was $0.68, compared to the most recent full-year payment of $0.96. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. Shutterstock has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. Shutterstock has impressed us by growing EPS at 28% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.
We Really Like Shutterstock's Dividend
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.
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. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 6 analysts we track are forecasting for Shutterstock for free with public analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated 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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