PriceSmart (NASDAQ:PSMT) Has Announced A Dividend Of $0.63

The board of PriceSmart, Inc. (NASDAQ:PSMT) has announced that it will pay a dividend of $0.63 per share on the 29th of August. This makes the dividend yield about the same as the industry average at 1.1%.

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PriceSmart's Projected Earnings Seem Likely To Cover Future Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, PriceSmart was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 6.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 26%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for PriceSmart

PriceSmart Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of $0.70 in 2015 to the most recent total annual payment of $1.26. This works out to be a compound annual growth rate (CAGR) of approximately 6.1% a year over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that PriceSmart has been growing its earnings per share at 13% a year over the past five years. PriceSmart definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like PriceSmart's Dividend

Overall, a dividend increase is always good, and we think that PriceSmart is a strong income stock thanks to its track record and growing earnings. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for PriceSmart that investors should know about before committing capital to this stock. Is PriceSmart 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.