PriceSmart's (NASDAQ:PSMT) Shareholders Will Receive A Bigger Dividend Than Last Year

PriceSmart, Inc. (NASDAQ:PSMT) will increase its dividend from last year's comparable payment on the 31st of August to $0.46. Even though the dividend went up, the yield is still quite low at only 1.2%.

Check out our latest analysis for PriceSmart

PriceSmart's Earnings Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive. However, PriceSmart's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 5.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 24% by next year, which is in a pretty sustainable range.

PriceSmart Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2013, the annual payment back then was $0.60, compared to the most recent full-year payment of $0.92. This works out to be a compound annual growth rate (CAGR) of approximately 4.4% a year over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

We Could See PriceSmart's Dividend Growing

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 that PriceSmart has been growing its earnings per share at 8.9% a 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.

PriceSmart Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income 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. Are management backing themselves to deliver performance? Check their shareholdings in PriceSmart in our latest insider ownership analysis. 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.