Signet Jewelers (NYSE:SIG) Is Paying Out A Larger Dividend Than Last Year
The board of Signet Jewelers Limited (NYSE:SIG) has announced that it will be paying its dividend of $0.29 on the 24th of May, an increased payment from last year's comparable dividend. This takes the annual payment to 1.3% of the current stock price, which unfortunately is below what the industry is paying.
See our latest analysis for Signet Jewelers
Signet Jewelers' Dividend Is Well Covered By Earnings
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, prior to this announcement, Signet Jewelers' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.
Looking forward, earnings per share is forecast to fall by 31.0% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 8.2%, which is comfortable for the company to continue in the future.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of $0.60 in 2014 to the most recent total annual payment of $1.16. This works out to be a compound annual growth rate (CAGR) of approximately 6.8% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.
The Dividend Looks Likely To Grow
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Signet Jewelers has impressed us by growing EPS at 58% 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 Signet Jewelers' Dividend
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. Taking this all into consideration, this looks like it could be a good dividend opportunity.
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. As an example, we've identified 2 warning signs for Signet Jewelers that you should be aware of before investing. Is Signet Jewelers 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.
