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 on the 27th of January, with investors receiving US$0.25 per share. This means the annual payment is 4.4% of the current stock price, which is above the average for the industry.

See our latest analysis for Village Super Market

Village Super Market's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last dividend was quite easily covered by Village Super Market's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, EPS could fall by 1.7% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could be 64%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The first annual payment during the last 10 years was US$0.45 in 2011, and the most recent fiscal year payment was US$1.00. This means that it has been growing its distributions at 8.3% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Village Super Market might have put its house in order since then, but we remain cautious.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. However, Village Super Market's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for Village Super Market you should be aware of, and 1 of them can't be ignored. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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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.