Pet Valu Holdings' (TSE:PET) Dividend Will Be CA$0.11

Pet Valu Holdings Ltd. (TSE:PET) will pay a dividend of CA$0.11 on the 17th of June. Including this payment, the dividend yield on the stock will be 1.6%, which is a modest boost for shareholders' returns.

See our latest analysis for Pet Valu Holdings

Pet Valu Holdings' Earnings Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive. However, Pet Valu Holdings' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 17.4%. If the dividend continues on this path, the payout ratio could be 29% by next year, which we think can be pretty sustainable going forward.

Pet Valu Holdings Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. Since 2021, the dividend has gone from CA$0.04 total annually to CA$0.44. This works out to be a compound annual growth rate (CAGR) of approximately 122% a year over that time. Pet Valu Holdings has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Pet Valu Holdings has impressed us by growing EPS at 52% per year over the past three years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like Pet Valu Holdings' Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Pet Valu Holdings that investors need to be conscious of moving forward. Is Pet Valu Holdings 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.