- Oops!Something went wrong.Please try again later.
DICK'S Sporting Goods, Inc. (NYSE:DKS) stock is about to trade ex-dividend in 2 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. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase DICK'S Sporting Goods' shares before the 9th of December to receive the dividend, which will be paid on the 29th of December.
The company's next dividend payment will be US$0.44 per share, and in the last 12 months, the company paid a total of US$1.75 per share. Based on the last year's worth of payments, DICK'S Sporting Goods has a trailing yield of 1.6% on the current stock price of $110.87. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. DICK'S Sporting Goods paid out just 8.9% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether DICK'S Sporting Goods generated enough free cash flow to afford its dividend. It paid out 9.5% of its free cash flow as dividends last year, which is conservatively low.
It's positive to see that DICK'S Sporting Goods's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
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. It's encouraging to see DICK'S Sporting Goods has grown its earnings rapidly, up 41% a year for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, DICK'S Sporting Goods looks like a promising growth company.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, DICK'S Sporting Goods has increased its dividend at approximately 13% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
From a dividend perspective, should investors buy or avoid DICK'S Sporting Goods? It's great that DICK'S Sporting Goods is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. There's a lot to like about DICK'S Sporting Goods, and we would prioritise taking a closer look at it.
So while DICK'S Sporting Goods looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, we've found 3 warning signs for DICK'S Sporting Goods (1 can't be ignored!) that deserve your attention before investing in the shares.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.