Escalade (NASDAQ:ESCA) Has Re-Affirmed Its Dividend Of US$0.14

The board of Escalade, Incorporated (NASDAQ:ESCA) has announced that it will pay a dividend of US$0.14 per share on the 13th of December. This makes the dividend yield 3.0%, which will augment investor returns quite nicely.

Check out our latest analysis for Escalade

Escalade's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Escalade is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS is forecast to fall by 2.7%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 34%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Escalade Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2011, the first annual payment was US$0.10, compared to the most recent full-year payment of US$0.56. This means that it has been growing its distributions at 19% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

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. Escalade has impressed us by growing EPS at 19% per year over the past five years. Escalade definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Escalade's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Escalade's payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. 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. To that end, Escalade has 3 warning signs (and 2 which make us uncomfortable) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.