Dollar General (NYSE:DG) Has Affirmed Its Dividend Of $0.59

The board of Dollar General Corporation (NYSE:DG) has announced that it will pay a dividend of $0.59 per share on the 23rd of July. This makes the dividend yield 1.8%, which will augment investor returns quite nicely.

View our latest analysis for Dollar General

Dollar General's Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, Dollar General's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 37.6% over the next year. If the dividend continues on this path, the payout ratio could be 29% by next year, which we think can be pretty sustainable going forward.

Dollar General Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 9 years of history we want to see a few more years of history before making any solid conclusions. Since 2015, the dividend has gone from $0.88 total annually to $2.36. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. Earnings has been rising at 2.3% per annum over the last five years, which admittedly is a bit slow. While EPS growth is quite low, Dollar General has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On Dollar General's Dividend

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 4 warning signs for Dollar General that investors should know about before committing capital to this stock. Is Dollar General not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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