Vestis (NYSE:VSTS) Has Affirmed Its Dividend Of $0.035

Vestis Corporation's (NYSE:VSTS) investors are due to receive a payment of $0.035 per share on 6th of January. The dividend yield is 0.9% based on this payment, which is a little bit low compared to the other companies in the industry.

Check out our latest analysis for Vestis

Vestis' Future Dividend Projections Appear Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, Vestis' dividend made up quite a large proportion of earnings but only 4.7% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Looking forward, earnings per share is forecast to rise exponentially over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 17%, which would make us comfortable with the dividend's sustainability, despite the levels currently being elevated.

Vestis Is Still Building Its Track Record

It's not possible for us to make a backward looking judgement just based on a short payment history. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

The Dividend Has Limited Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. Vestis has seen EPS fall by 90% over the last 12 months. Reduced dividend payments are a common consequence of declining earnings. We do note though, one year is too short a time to be drawing strong conclusions about a company's future prospects.

Our Thoughts On Vestis' Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Vestis (1 is potentially serious!) that you should be aware of before investing. Is Vestis not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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