Weis Markets (NYSE:WMK) Is Paying Out A Dividend Of $0.34

The board of Weis Markets, Inc. (NYSE:WMK) has announced that it will pay a dividend of $0.34 per share on the 4th of March. This means the annual payment is 2.3% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Weis Markets

Weis Markets' Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Weis Markets was paying only paying out a fraction of earnings, but the payment was a massive 845% of cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

Unless the company can turn things around, EPS could fall by 0.2% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 33%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Weis Markets Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the annual payment back then was $1.20, compared to the most recent full-year payment of $1.36. This implies that the company grew its distributions at a yearly rate of about 1.3% over that duration. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

Weis Markets May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. Weis Markets hasn't seen much change in its earnings per share over the last five years.

Our Thoughts On Weis Markets' Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Weis Markets that investors should know about before committing capital to this stock. Is Weis Markets not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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