Yahoo Finance Dollar General's (NYSE:DG) Dividend Will Be $0.59
The board of Dollar General Corporation (NYSE:DG) has announced that it will pay a dividend of $0.59 per share on the 23rd of July. The dividend yield will be 1.7% based on this payment which is still above the industry average.
Check out our latest analysis for Dollar General
Dollar General's Earnings Easily Cover The Distributions
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, based ont he last payment, Dollar General was earning enough to cover the dividend pretty comfortably. The business is returning a large chunk of its cash to shareholders, which means it is not being used to grow the business.
The next year is set to see EPS grow by 20.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 30%, which is in the range that makes us comfortable with the sustainability of the dividend.
Dollar General Is Still Building Its Track Record
The dividend's track record has been pretty solid, but with only 9 years of history we want to see a few more years of history before making any solid conclusions. The dividend has gone from an annual total of $0.88 in 2015 to the most recent total annual payment of $2.36. This means that it has been growing its distributions at 12% per annum over that time. Dollar General has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.
Dividend Growth May Be Hard To Achieve
Investors could be attracted to the stock based on the quality of its payment history. Earnings have grown at around 4.7% a year for the past five years, which isn't massive but still better than seeing them shrink. While EPS growth is quite low, Dollar General has the option to increase the payout ratio to return more cash to shareholders.
In Summary
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While Dollar General is earning enough to cover the dividend, we are generally unimpressed with its future prospects. Overall, we don't think this company has the makings of a good income stock.
Investors generally tend to favour 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 analysing stock performance. Taking the debate a bit further, we've identified 4 warning signs for Dollar General 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.
