Vector Group's (NYSE:VGR) Dividend Will Be $0.20
Vector Group Ltd. (NYSE:VGR) will pay a dividend of $0.20 on the 29th of June. Based on this payment, the dividend yield will be 6.3%, which is fairly typical for the industry.
See our latest analysis for Vector Group
Vector Group's Payment Has Solid Earnings Coverage
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Before this announcement, Vector Group was paying out 78% of earnings, but a comparatively small 59% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.
Over the next year, EPS could expand by 10.3% if recent trends continue. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 71% which brings it into quite a comfortable range.
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. Since 2013, the dividend has gone from $1.08 total annually to $0.80. The dividend has shrunk at around 3.0% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.
Dividend Growth Could Be Constrained
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Vector Group has grown earnings per share at 10% per year over the past five years. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.
Our Thoughts On Vector Group's Dividend
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Vector Group has 4 warning signs (and 2 which are significant) we think you should know about. 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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