Natural Grocers by Vitamin Cottage (NYSE:NGVC) Is Increasing Its Dividend To $0.15

Natural Grocers by Vitamin Cottage, Inc. (NYSE:NGVC) will increase its dividend from last year's comparable payment on the 10th of December to $0.15. This takes the dividend yield to 2.1%, which shareholders will be pleased with.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Natural Grocers by Vitamin Cottage's stock price has reduced by 32% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

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Natural Grocers by Vitamin Cottage's Projected Earnings Seem Likely To Cover Future Distributions

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.

If the trend of the last few years continues, EPS will grow by 17.9% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 25% by next year, which is in a pretty sustainable range.

See our latest analysis for Natural Grocers by Vitamin Cottage

Natural Grocers by Vitamin Cottage Doesn't Have A Long Payment History

It is great to see that Natural Grocers by Vitamin Cottage has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The dividend has gone from an annual total of $0.28 in 2019 to the most recent total annual payment of $0.60. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Natural Grocers by Vitamin Cottage has impressed us by growing EPS at 18% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Natural Grocers by Vitamin Cottage's prospects of growing its dividend payments in the future.

We Really Like Natural Grocers by Vitamin Cottage's Dividend

Overall, a dividend increase is always good, and we think that Natural Grocers by Vitamin Cottage is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. See if management have their own wealth at stake, by checking insider shareholdings in Natural Grocers by Vitamin Cottage stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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