Village Super Market's (NASDAQ:VLGE.A) Dividend Will Be US$0.25

The board of Village Super Market, Inc. (NASDAQ:VLGE.A) has announced that it will pay a dividend of US$0.25 per share on the 28th of October. Based on this payment, the dividend yield on the company's stock will be 4.6%, which is an attractive boost to shareholder returns.

See our latest analysis for Village Super Market

Village Super Market's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last payment made up 74% of earnings, but cash flows were much higher. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Looking forward, could fall by 4.0% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we think the payout ratio could reach 77%, which is definitely on the higher side.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. Since 2011, the dividend has gone from US$0.45 to US$1.00. This works out to be a compound annual growth rate (CAGR) of approximately 8.3% a year over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Village Super Market has seen earnings per share falling at 4.0% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

Our Thoughts On Village Super Market's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Village Super Market's payments, as there could be some issues with sustaining them into the future. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. Overall, we don't think this company has the makings of a good income stock.

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. Just as an example, we've come across 2 warning signs for Village Super Market you should be aware of, and 1 of them is a bit concerning. We have also put together a list of global stocks with a solid dividend.

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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.
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