Stock Analysis

SpartanNash (NASDAQ:SPTN) Is Due To Pay A Dividend Of $0.21

NasdaqGS:SPTN
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SpartanNash Company (NASDAQ:SPTN) will pay a dividend of $0.21 on the 30th of December. This means the annual payment is 2.6% of the current stock price, which is above the average for the industry.

Our analysis indicates that SPTN is potentially undervalued!

SpartanNash's Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, SpartanNash's earnings easily covered the dividend, but free cash flows were negative. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Looking forward, earnings per share is forecast to rise by 74.5% over the next year. If the dividend continues on this path, the payout ratio could be 32% by next year, which we think can be pretty sustainable going forward.

historic-dividend
NasdaqGS:SPTN Historic Dividend November 22nd 2022

SpartanNash Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2012, the annual payment back then was $0.26, compared to the most recent full-year payment of $0.84. This means that it has been growing its distributions at 12% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

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 SpartanNash has been growing its earnings per share at 49% a year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that SpartanNash could prove to be a strong dividend payer.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about SpartanNash's payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

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. To that end, SpartanNash has 3 warning signs (and 1 which is a bit concerning) we think you should know about. 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.