Over the past 10 years Tapestry, Inc. (NYSE:TPR) has been paying dividends to shareholders. The company is currently worth US$9.7b, and now yields roughly 4.0%. Should it have a place in your portfolio? Let’s take a look at Tapestry in more detail.
View our latest analysis for Tapestry
How I analyze a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is its annual yield among the top 25% of dividend-paying companies?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has dividend per share risen in the past couple of years?
- Can it afford to pay the current rate of dividends from its earnings?
- Will it have the ability to keep paying its dividends going forward?
Does Tapestry pass our checks?
The current trailing twelve-month payout ratio for the stock is 53%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect TPR’s payout to fall to 47% of its earnings. Assuming a constant share price, this equates to a dividend yield of 4.2%. However, EPS should increase to $2.57, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. TPR has increased its DPS from $0.30 to $1.35 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes TPR a true dividend rockstar.
Compared to its peers, Tapestry produces a yield of 4.0%, which is high for Luxury stocks.
Next Steps:
With these dividend metrics in mind, I definitely rank Tapestry as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. Below, I’ve compiled three fundamental factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for TPR’s future growth? Take a look at our free research report of analyst consensus for TPR’s outlook.
- Valuation: What is TPR worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether TPR is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.