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

Dollar General Corporation (NYSE:DG) will pay a dividend of $0.59 on the 22nd of April. This means the annual payment is 3.0% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Dollar General

Dollar General's Payment Could Potentially Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Dollar General was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

The next year is set to see EPS grow by 38.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 38% by next year, which is in a pretty sustainable range.

Dollar General Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $0.88 in 2015, and the most recent fiscal year payment was $2.36. This means that it has been growing its distributions at 10% per annum over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

Dividend Growth May Be Hard To Come By

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. Dollar General has seen earnings per share falling at 5.2% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

In Summary

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 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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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.