Natural Grocers by Vitamin Cottage (NYSE:NGVC) Is Paying Out A Dividend Of $0.10

The board of Natural Grocers by Vitamin Cottage, Inc. (NYSE:NGVC) has announced that it will pay a dividend on the 20th of March, with investors receiving $0.10 per share. This makes the dividend yield 2.3%, which will augment investor returns quite nicely.

View our latest analysis for Natural Grocers by Vitamin Cottage

Natural Grocers by Vitamin Cottage Doesn't Earn Enough To Cover Its Payments

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, Natural Grocers by Vitamin Cottage's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to grow by 22.0% over the next year if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could reach 121%, which probably can't continue without starting to put some pressure on 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. Since 2020, the dividend has gone from $0.28 total annually to $0.40. This works out to be a compound annual growth rate (CAGR) of approximately 9.3% a year over that time. Natural Grocers by Vitamin Cottage has been growing its dividend at a decent rate, and the payments have been stable. However, the payment history is very short, so there is no evidence yet that the dividend can be sustained over a full economic cycle.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Natural Grocers by Vitamin Cottage has been growing its earnings per share at 22% a year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like Natural Grocers by Vitamin Cottage's Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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