Vail Resorts (NYSE:MTN) Will Pay A Larger Dividend Than Last Year At $2.22
The board of Vail Resorts, Inc. (NYSE:MTN) has announced that it will be increasing its dividend by 7.8% on the 11th of April to $2.22, up from last year's comparable payment of $2.06. This will take the dividend yield to an attractive 3.7%, providing a nice boost to shareholder returns.
Check out our latest analysis for Vail Resorts
Vail Resorts' Earnings Easily Cover The Distributions
A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, the company was paying out 132% of what it was earning and 85% of cash flows. While the cash payout ratio isn't necessarily a cause for concern, the company is probably focusing more on returning cash to shareholders than growing the business.
Earnings per share is forecast to rise by 74.6% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 86% - on the higher side, but we wouldn't necessarily say this is unsustainable.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the annual payment back then was $0.83, compared to the most recent full-year payment of $8.24. This means that it has been growing its distributions at 26% per annum over that time. Vail Resorts has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.
Dividend Growth May Be Hard To Achieve
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Vail Resorts hasn't seen much change in its earnings per share over the last five years.
Vail Resorts' Dividend Doesn't Look Sustainable
Overall, we always like to see the dividend being raised, but we don't think Vail Resorts will make a great income stock. The payments are bit high to be considered sustainable, and the track record isn't the best. We would probably look elsewhere for an income investment.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 3 warning signs for Vail Resorts that investors need to be conscious of moving forward. 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.
