Garmin (NYSE:GRMN) Is Paying Out A Dividend Of $0.73

Garmin Ltd.'s (NYSE:GRMN) investors are due to receive a payment of $0.73 per share on 30th of June. This makes the dividend yield 2.8%, which will augment investor returns quite nicely.

Check out our latest analysis for Garmin

Garmin's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, based ont he last payment, Garmin was earning enough to cover the dividend pretty comfortably. The business is returning a large chunk of its cash to shareholders, which means it is not being used to grow the business.

The next year is set to see EPS grow by 28.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 46%, which is in the range that makes us comfortable with the sustainability of the dividend.

Garmin Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $1.80 in 2013, and the most recent fiscal year payment was $2.92. This implies that the company grew its distributions at a yearly rate of about 5.0% over that duration. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

The Dividend Has Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. Garmin has impressed us by growing EPS at 9.6% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Garmin's prospects of growing its dividend payments in the future.

In Summary

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. On the plus side, the dividend looks sustainable by most measures but it is let down by the lack of cash flows. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Garmin that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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