Yahoo Finance Smith & Wesson Brands (NASDAQ:SWBI) Has Announced That It Will Be Increasing Its Dividend To $0.13
Smith & Wesson Brands, Inc. (NASDAQ:SWBI) has announced that it will be increasing its dividend from last year's comparable payment on the 25th of July to $0.13. Based on this payment, the dividend yield for the company will be 3.7%, which is fairly typical for the industry.
Check out our latest analysis for Smith & Wesson Brands
Smith & Wesson Brands' Payment Has Solid Earnings Coverage
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. The last payment was quite easily covered by earnings, but it made up 106% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.
Looking forward, earnings per share could rise by 13.7% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 68% by next year, which we think can be pretty sustainable going forward.
Smith & Wesson Brands Doesn't Have A Long Payment History
The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The dividend has gone from an annual total of $0.20 in 2020 to the most recent total annual payment of $0.52. This implies that the company grew its distributions at a yearly rate of about 27% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Smith & Wesson Brands has been growing its earnings per share at 14% a year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.
Our Thoughts On Smith & Wesson Brands' Dividend
Overall, we always like to see the dividend being raised, but we don't think Smith & Wesson Brands will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Smith & Wesson Brands that investors should take into consideration. Is Smith & Wesson Brands 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 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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