Ralph Lauren (NYSE:RL) Is Paying Out A Larger Dividend Than Last Year

The board of Ralph Lauren Corporation (NYSE:RL) has announced that the dividend on 12th of July will be increased to $0.825, which will be 10.0% higher than last year's payment of $0.75 which covered the same period. Based on this payment, the dividend yield for the company will be 1.7%, which is fairly typical for the industry.

See our latest analysis for Ralph Lauren

Ralph Lauren's Dividend Is Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Before making this announcement, Ralph Lauren was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 46.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 21% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the dividend has gone from $1.60 total annually to $3.00. This works out to be a compound annual growth rate (CAGR) of approximately 6.5% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Ralph Lauren might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Ralph Lauren has seen EPS rising for the last five years, at 14% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Ralph Lauren Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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 in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for Ralph Lauren that investors need to be conscious of moving forward. Is Ralph Lauren 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.