Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Marriott International, Inc. (NASDAQ:MAR) is about to trade ex-dividend in the next 4 days. This means that investors who purchase shares on or after the 27th of February will not receive the dividend, which will be paid on the 31st of March.
Marriott International's next dividend payment will be US$0.48 per share. Last year, in total, the company distributed US$1.92 to shareholders. Based on the last year's worth of payments, Marriott International has a trailing yield of 1.3% on the current stock price of $143.24. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Marriott International's payout ratio is modest, at just 46% of profit. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 43% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that Marriott International's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Marriott International's earnings per share have risen 14% per annum over the last five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Marriott International has delivered an average of 28% per year annual increase in its dividend, based on the past ten years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
The Bottom Line
Is Marriott International worth buying for its dividend? We love that Marriott International is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. Overall we think this is an attractive combination and worthy of further research.
Wondering what the future holds for Marriott International? See what the 18 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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