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Winmark (NASDAQ:WINA) Has Announced That It Will Be Increasing Its Dividend To US$0.70

·2-min read

Winmark Corporation (NASDAQ:WINA) will increase its dividend on the 1st of June to US$0.70, which is 56% higher than last year. This will take the annual payment from 4.6% to 4.7% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Winmark

Winmark's Earnings Easily Cover the Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Winmark was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS could expand by 15.7% if the company continues along the path it has been on recently. If the dividend continues growing along recent trends, we estimate the payout ratio could reach 90%, which is on the higher side, but certainly still feasible.

historic-dividend
historic-dividend

Winmark Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from US$0.12 in 2012 to the most recent annual payment of US$9.30. This works out to be a compound annual growth rate (CAGR) of approximately 55% 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 Winmark has grown earnings per share at 16% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like Winmark's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for Winmark (of which 1 shouldn't be ignored!) you should know about. Is Winmark 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.