Garmin Ltd. (NYSE:GRMN) has announced that it will pay a dividend of $0.73 per share on the 29th of March. This makes the dividend yield 2.4%, which will augment investor returns quite nicely.
Check out 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. Prior to this announcement, Garmin's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
Looking forward, earnings per share is forecast to rise by 31.0% over the next year. If the dividend continues on this path, the payout ratio could be 43% by next year, which we think can be pretty sustainable going forward.
Garmin Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was $1.80 in 2014, and the most recent fiscal year payment was $2.92. This works out to be a compound annual growth rate (CAGR) of approximately 5.0% a year over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.
We Could See Garmin's Dividend Growing
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. 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. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Earnings growth generally bodes well for the future value of company dividend payments. See if the 8 Garmin analysts we track are forecasting continued growth with our free report on 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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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.
About NYSE:GRMN
Garmin
Designs, develops, manufactures, markets, and distributes a range of wireless devices worldwide.
Outstanding track record with flawless balance sheet and pays a dividend.
