Dollar General Corporation (NYSE:DG) will pay a dividend of $0.59 on the 23rd of April. This payment means that the dividend yield will be 1.5%, which is around the industry average.
View our latest analysis for Dollar General
Dollar General’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. However, prior to this announcement, Dollar General’s dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.
Looking forward, earnings per share is forecast to rise by 22.3% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 29%, which is in the range that makes us comfortable with the sustainability of the dividend.
Dollar General Doesn’t Have A Long Payment History
Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2015, the annual payment back then was $0.88, compared to the most recent full-year payment of $2.36. This means that it has been growing its distributions at 12% per annum over that time. We’re not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.
Dividend Growth May Be Hard To Achieve
Some investors will be chomping at the bit to buy some of the company’s stock based on its dividend history. However, Dollar General has only grown its earnings per share at 4.8% per annum over the past five years. While growth may be thin on the ground, Dollar General could always pay out a higher proportion of earnings to increase shareholder returns.
Our Thoughts On Dollar General’s Dividend
In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. While the payout ratios are a good sign, we are less enthusiastic about the company’s dividend record. The payment isn’t stellar, but it could make a decent addition to a dividend portfolio.
Investors generally tend to favor companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analyzing stock performance. For example, we’ve picked out 2 warning signs for Dollar General that investors should know about before committing capital to this stock. Is Dollar General not quite the opportunity you were looking for? Why not check out our selection of top 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 into account 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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