Garmin (NYSE:GRMN) Will Pay A Dividend Of $0.73

The board of Garmin Ltd. (NYSE:GRMN) has announced that it will pay a dividend on the 29th of December, with investors receiving $0.73 per share. This means the annual payment is 2.8% of the current stock price, which is above the average for the industry.

View our latest analysis for Garmin

Garmin's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite easily covered by Garmin's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

The next year is set to see EPS grow by 29.1%. 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 been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of $1.80 in 2013 to the most recent total annual payment of $2.92. This implies that the company grew its distributions at a yearly rate of about 5.0% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

The Dividend Has Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Garmin has seen EPS rising for the last five years, at 9.8% per annum. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

We Really Like Garmin's 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. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 7 analysts we track are forecasting for Garmin for free with public analyst estimates for the company. Is Garmin not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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