Readers hoping to buy Shoe Carnival, Inc. (NASDAQ:SCVL) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Investors can purchase shares before the 10th of January in order to be eligible for this dividend, which will be paid on the 27th of January.
Shoe Carnival’s next dividend payment will be US$0.085 per share, on the back of last year when the company paid a total of US$0.34 to shareholders. Last year’s total dividend payments show that Shoe Carnival has a trailing yield of 0.9% on the current share price of $37.73. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That’s why we should always check whether the dividend payments appear sustainable, and if the company is growing.
See our latest analysis for Shoe Carnival
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. Shoe Carnival has a low and conservative payout ratio of just 12% of its income after tax. A useful secondary check can be to evaluate whether Shoe Carnival generated enough free cash flow to afford its dividend. It paid out 12% of its free cash flow as dividends last year, which is conservatively low.
It’s positive to see that Shoe Carnival’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.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we’re glad to see Shoe Carnival’s earnings per share have risen 16% per annum over the last five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. This will make it easier to fund future growth efforts and we think this is an attractive combination – plus the dividend can always be increased later.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. Shoe Carnival has delivered an average of 6.9% 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.
Final Takeaway
Is Shoe Carnival worth buying for its dividend? We love that Shoe Carnival is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. There’s a lot to like about Shoe Carnival, and we would prioritise taking a closer look at it.
Wondering what the future holds for Shoe Carnival? See what the four analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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