PriceSmart (NASDAQ:PSMT) Will Pay A Larger Dividend Than Last Year At $0.58

The board of PriceSmart, Inc. (NASDAQ:PSMT) has announced that the dividend on 29th of February will be increased to $0.58, which will be 26% higher than last year's payment of $0.46 which covered the same period. Based on this payment, the dividend yield for the company will be 1.2%, which is fairly typical for the industry.

View our latest analysis for PriceSmart

PriceSmart's Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, prior to this announcement, PriceSmart's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 13.9%. If the dividend continues on this path, the payout ratio could be 25% by next year, which we think can be pretty sustainable going forward.

PriceSmart Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the dividend has gone from $0.70 total annually to $0.92. This works out to be a compound annual growth rate (CAGR) of approximately 2.8% a year over that time. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

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. We are encouraged to see that PriceSmart has grown earnings per share at 11% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for PriceSmart's prospects of growing its dividend payments in the future.

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. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in PriceSmart stock. 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.