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Why You Might Be Interested In Weis Markets, Inc. (NYSE:WMK) For Its Upcoming Dividend

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Weis Markets, Inc. (NYSE:WMK) stock is about to trade ex-dividend in two days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase Weis Markets' shares on or after the 6th of May, you won't be eligible to receive the dividend, when it is paid on the 23rd of May.

The company's upcoming dividend is US$0.32 a share, following on from the last 12 months, when the company distributed a total of US$1.28 per share to shareholders. Last year's total dividend payments show that Weis Markets has a trailing yield of 1.6% on the current share price of $80.14. If you buy this business for its dividend, you should have an idea of whether Weis Markets's dividend is reliable and sustainable. As a result, readers should always check whether Weis Markets has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Weis Markets

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. That's why it's good to see Weis Markets paying out a modest 31% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It distributed 44% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Weis Markets'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 Weis Markets 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Weis Markets earnings per share are up 4.5% per annum over the last five years. Earnings per share growth in recent times has not been a standout. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.

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, Weis Markets has lifted its dividend by approximately 1.0% a year on average.

Final Takeaway

Has Weis Markets got what it takes to maintain its dividend payments? Earnings per share growth has been growing somewhat, and Weis Markets is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Weis Markets is halfway there. It's a promising combination that should mark this company worthy of closer attention.

In light of that, while Weis Markets has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 1 warning sign for Weis Markets you should know about.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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.