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Williams-Sonoma's (NYSE:WSM) Shareholders Will Receive A Smaller Dividend Than Last Year

Williams-Sonoma, Inc.'s (NYSE:WSM) dividend is being reduced from last year's payment covering the same period to $0.57 on the 23rd of September. Despite the cut, the dividend yield of 1.5% will still be comparable to other companies in the industry.

Check out our latest analysis for Williams-Sonoma

Williams-Sonoma's Payment Has Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. However, Williams-Sonoma's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

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Looking forward, earnings per share is forecast to rise by 12.5% over the next year. If the dividend continues on this path, the payout ratio could be 21% by next year, which we think can be pretty sustainable going forward.

historic-dividend
historic-dividend

Williams-Sonoma Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $1.24 in 2014 to the most recent total annual payment of $4.52. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Williams-Sonoma has grown earnings per share at 31% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like Williams-Sonoma's Dividend

In general, we don't like to see the dividend being cut, especially when the company has such high potential like Williams-Sonoma does. The cut will allow the company to continue paying out the dividend without putting the balance sheet under pressure, which means that it could remain sustainable for longer. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Williams-Sonoma that investors need to be conscious of moving forward. Is Williams-Sonoma not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com