Yahoo Finance Be Sure To Check Out Marriott Vacations Worldwide Corporation (NYSE:VAC) Before It Goes Ex-Dividend
It looks like Marriott Vacations Worldwide Corporation (NYSE:VAC) is about to go ex-dividend in the next 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. This means that investors who purchase Marriott Vacations Worldwide's shares on or after the 1st of March will not receive the dividend, which will be paid on the 16th of March.
The company's next dividend payment will be US$0.72 per share, on the back of last year when the company paid a total of US$2.88 to shareholders. Based on the last year's worth of payments, Marriott Vacations Worldwide stock has a trailing yield of around 1.9% on the current share price of $152.03. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for Marriott Vacations Worldwide
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. Marriott Vacations Worldwide paid out a comfortable 27% of its profit last year. 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 paid out 22% of its free cash flow as dividends last year, which is conservatively low.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Marriott Vacations Worldwide earnings per share are up 3.8% per annum over the last five years. Recent growth has not been impressive. 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. Marriott Vacations Worldwide has delivered an average of 14% per year annual increase in its dividend, based on the past eight years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
The Bottom Line
Is Marriott Vacations Worldwide an attractive dividend stock, or better left on the shelf? Earnings per share growth has been growing somewhat, and Marriott Vacations Worldwide 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 Marriott Vacations Worldwide is halfway there. It's a promising combination that should mark this company worthy of closer attention.
While it's tempting to invest in Marriott Vacations Worldwide for the dividends alone, you should always be mindful of the risks involved. We've identified 2 warning signs with Marriott Vacations Worldwide (at least 1 which makes us a bit uncomfortable), and understanding these should be part of your investment process.
A common investing mistake is buying the first interesting stock you see. Here you can find a full 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.
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