Natural Grocers by Vitamin Cottage (NYSE:NGVC) Has Announced A Dividend Of US$0.07

The board of Natural Grocers by Vitamin Cottage, Inc. (NYSE:NGVC) has announced that it will pay a dividend on the 15th of September, with investors receiving US$0.07 per share. The dividend yield will be 19% based on this payment which is still above the industry average.

Check out our latest analysis for Natural Grocers by Vitamin Cottage

Natural Grocers by Vitamin Cottage Is Paying Out More Than It Is Earning

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, prior to this announcement, Natural Grocers by Vitamin Cottage's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS could expand by 5.7% if the company continues along the path it has been on recently. If the dividend continues on its recent course, the payout ratio in 12 months could be 285%, which is a bit high and could start applying pressure to the balance sheet.

Natural Grocers by Vitamin Cottage Is Still Building Its Track Record

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The last annual payment of US$0.28 was flat on the first annual payment 2 years ago. We like that the dividend hasn't been shrinking. However we're conscious that the company hasn't got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.

The Dividend Has Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see Natural Grocers by Vitamin Cottage has been growing its earnings per share at 5.7% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On Natural Grocers by Vitamin Cottage'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.

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. For example, we've picked out 2 warning signs for Natural Grocers by Vitamin Cottage that investors should know about before committing capital to this stock. 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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