There's A Lot To Like About Winmark's (NASDAQ:WINA) Upcoming US$0.80 Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Winmark Corporation (NASDAQ:WINA) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Winmark investors that purchase the stock on or after the 16th of May will not receive the dividend, which will be paid on the 1st of June.
The company's next dividend payment will be US$0.80 per share, and in the last 12 months, the company paid a total of US$6.20 per share. Based on the last year's worth of payments, Winmark has a trailing yield of 1.9% on the current stock price of $325.89. If you buy this business for its dividend, you should have an idea of whether Winmark's dividend is reliable and sustainable. As a result, readers should always check whether Winmark has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Winmark
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Winmark's payout ratio is modest, at just 25% of profit. A useful secondary check can be to evaluate whether Winmark generated enough free cash flow to afford its dividend. The good news is it paid out just 24% of its free cash flow in the last year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see how much of its profit Winmark paid out over the last 12 months.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Winmark's earnings per share have been growing at 13% a year for the past five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Winmark has lifted its dividend by approximately 44% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
To Sum It Up
Has Winmark got what it takes to maintain its dividend payments? Winmark has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. Overall we think this is an attractive combination and worthy of further research.
In light of that, while Winmark has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 4 warning signs for Winmark that we strongly recommend you have a look at before investing in the company.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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