The board of Ingles Markets, Incorporated (NASDAQ:IMKT.A) has announced that it will pay a dividend on the 15th of July, with investors receiving US$0.17 per share. Including this payment, the dividend yield on the stock will be 1.1%, which is a modest boost for shareholders' returns.
Ingles Markets' Dividend Is Well Covered By Earnings
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, prior to this announcement, Ingles Markets' 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.
If the trend of the last few years continues, EPS will grow by 31.6% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 4.5%, which is in the range that makes us comfortable with the sustainability of the dividend.
Ingles Markets Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The last annual payment of US$0.66 was flat on the first annual payment 10 years ago. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see Ingles Markets has been growing its earnings per share at 32% a year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.
Ingles Markets Looks Like A Great Dividend Stock
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. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Ingles Markets that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.
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