Ralph Lauren's (NYSE:RL) Dividend Will Be $0.75

Ralph Lauren Corporation (NYSE:RL) will pay a dividend of $0.75 on the 13th of October. This makes the dividend yield 2.6%, which will augment investor returns quite nicely.

See our latest analysis for Ralph Lauren

Ralph Lauren's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, prior to this announcement, Ralph Lauren's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 54.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 25% by next year, which is in a pretty sustainable range.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2013, the dividend has gone from $1.60 total annually to $3.00. This implies that the company grew its distributions at a yearly rate of about 6.5% over that duration. 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

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Ralph Lauren has seen EPS rising for the last five years, at 26% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like Ralph Lauren's Dividend

Overall, we like to see the dividend staying consistent, and we think Ralph Lauren might even raise payments in the future. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend 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. For instance, we've picked out 1 warning sign for Ralph Lauren that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.