V.F (NYSE:VFC) Will Pay A Larger Dividend Than Last Year At $0.51
V.F. Corporation's (NYSE:VFC) periodic dividend will be increasing on the 20th of December to $0.51, with investors receiving 2.0% more than last year's $0.50. This takes the dividend yield to 7.1%, 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. V.F's stock price has reduced by 37% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.
View our latest analysis for V.F
V.F's Dividend Is Well Covered By Earnings
A big dividend yield for a few years doesn't mean much if it can't be sustained. Before this announcement, V.F was paying out 183% of what it was earning, and not generating any free cash flows either. Paying out such a large dividend compared to earnings while also not generating any free cash flow would definitely be difficult to keep up.
According to analysts, EPS should be several times higher next year. If the dividend continues along recent trends, we estimate the payout ratio will be 57%, which would make us comfortable with the dividend's sustainability, despite the levels currently being elevated.
V.F Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of $0.72 in 2012 to the most recent total annual payment of $2.00. This means that it has been growing its distributions at 11% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
Dividend Growth Potential Is Shaky
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. Over the past five years, it looks as though V.F's EPS has declined at around 16% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.
V.F's Dividend Doesn't Look Sustainable
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We don't think V.F is a great stock to add to your portfolio if income is your focus.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. To that end, V.F has 4 warning signs (and 2 which are a bit unpleasant) we think you should know about. Is V.F not quite the opportunity you were looking for? Why not check out 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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
