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Village Super Market, Inc. (NASDAQ:VLGE.A) Pays A US$0.25 Dividend In Just Four Days

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Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Village Super Market, Inc. (NASDAQ:VLGE.A) is about to go ex-dividend in just 4 days. This means that investors who purchase shares on or after the 30th of September will not receive the dividend, which will be paid on the 22nd of October.

Village Super Market's next dividend payment will be US$0.25 per share, and in the last 12 months, the company paid a total of US$1.00 per share. Based on the last year's worth of payments, Village Super Market has a trailing yield of 4.1% on the current stock price of $24.39. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Village Super Market

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Village Super Market is paying out an acceptable 64% of its profit, a common payout level among most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out more than half (70%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Village Super Market's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see how much of its profit Village Super Market paid out over the last 12 months.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Village Super Market has grown its earnings rapidly, up 34% a year for the past five years. The current payout ratio suggests a good balance between rewarding shareholders with dividends, and reinvesting in growth. Earnings per share have been growing quickly and in combination with some reinvestment and a middling payout ratio, the stock may have decent dividend prospects going forwards.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. It looks like the Village Super Market dividends are largely the same as they were 10 years ago.

The Bottom Line

Is Village Super Market an attractive dividend stock, or better left on the shelf? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. However, we'd also note that Village Super Market is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. Overall, it's hard to get excited about Village Super Market from a dividend perspective.

So while Village Super Market looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For instance, we've identified 3 warning signs for Village Super Market (1 is a bit unpleasant) you should be aware of.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

This article by Simply Wall St is general in nature. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.