Tapestry (NYSE:TPR) Is Due To Pay A Dividend Of $0.35

The board of Tapestry, Inc. (NYSE:TPR) has announced that it will pay a dividend of $0.35 per share on the 23rd of September. This means the annual payment is 3.5% of the current stock price, which is above the average for the industry.

View our latest analysis for Tapestry

Tapestry's Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Tapestry 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 42.1%. If the dividend continues on this path, the payout ratio could be 27% by next year, which we think can be pretty sustainable going forward.

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. The annual payment during the last 10 years was $1.35 in 2014, and the most recent fiscal year payment was $1.40. Its dividends have grown at less than 1% per annum over this time frame. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend Has Growth Potential

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. Tapestry has seen EPS rising for the last five years, at 9.8% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Tapestry Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. 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. Taking the debate a bit further, we've identified 1 warning sign for Tapestry that investors need to be conscious of moving forward. Is Tapestry not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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