There's A Lot To Like About Victory Supermarket Chain's (TLV:VCTR) Upcoming ₪1.0444329 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Victory Supermarket Chain Ltd (TLV:VCTR) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Victory Supermarket Chain's shares before the 11th of April in order to receive the dividend, which the company will pay on the 21st of April.

The company's next dividend payment will be ₪1.0444329 per share, on the back of last year when the company paid a total of ₪1.04 to shareholders. Based on the last year's worth of payments, Victory Supermarket Chain stock has a trailing yield of around 2.1% on the current share price of ₪48.97. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Victory Supermarket Chain

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see Victory Supermarket Chain paying out a modest 40% of its earnings. A useful secondary check can be to evaluate whether Victory Supermarket Chain generated enough free cash flow to afford its dividend. Luckily it paid out just 9.1% of its free cash flow last year.

It's positive to see that Victory Supermarket Chain'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 how much of its profit Victory Supermarket Chain paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Victory Supermarket Chain earnings per share are up 6.1% per annum over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Victory Supermarket Chain has delivered 10% dividend growth per year on average over the past 10 years. 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.

To Sum It Up

Is Victory Supermarket Chain worth buying for its dividend? Earnings per share growth has been growing somewhat, and Victory Supermarket Chain is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but Victory Supermarket Chain is being conservative with its dividend payouts and could still perform reasonably over the long run. There's a lot to like about Victory Supermarket Chain, and we would prioritise taking a closer look at it.

Want to learn more about Victory Supermarket Chain's dividend performance? Check out this visualisation of its historical revenue and earnings growth.

If you're in the market for strong dividend payers, we recommend checking 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.