Yahoo Finance Vector Group (NYSE:VGR) Is Due To Pay A Dividend Of $0.20
The board of Vector Group Ltd. (NYSE:VGR) has announced that it will pay a dividend on the 29th of September, with investors receiving $0.20 per share. This means the annual payment is 7.7% of the current stock price, which is above the average for the industry.
See our latest analysis for Vector Group
Vector Group Doesn't Earn Enough To Cover Its Payments
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Vector Group's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.
EPS is set to grow by 20.7% over the next year if recent trends continue. If the dividend continues on its recent course, the payout ratio in 12 months could be 542%, which is a bit high and could start applying pressure to the balance sheet.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the dividend has gone from $1.03 total annually to $0.80. The dividend has shrunk at around 2.5% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
Vector Group Might Find It Hard To Grow Its Dividend
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Vector Group has seen EPS rising for the last five years, at 21% per annum. Strong earnings is nice to see, but unless this can be sustained on minimal reinvestment of profits, we would question whether dividends will follow suit.
Our Thoughts On Vector Group's Dividend
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Vector Group has 5 warning signs (and 2 which are a bit unpleasant) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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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