Nathan's Famous' (NASDAQ:NATH) Dividend Will Be $0.50

The board of Nathan's Famous, Inc. (NASDAQ:NATH) has announced that it will pay a dividend on the 28th of February, with investors receiving $0.50 per share. This means that the annual payment will be 2.4% of the current stock price, which is in line with the average for the industry.

Check out our latest analysis for Nathan's Famous

Nathan's Famous' Projected Earnings Seem Likely To Cover Future Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, Nathan's Famous was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 13.9% over the next 12 months. If the dividend continues on this path, the payout ratio could be 35% by next year, which we think can be pretty sustainable going forward.

Nathan's Famous Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 7 years of history we want to see a few more years of history before making any solid conclusions. Since 2018, the dividend has gone from $1.00 total annually to $2.00. This works out to be a compound annual growth rate (CAGR) of approximately 10% a year over that time. 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

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Nathan's Famous has been growing its earnings per share at 14% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Nathan's Famous' prospects of growing its dividend payments in the future.

We Really Like Nathan's Famous' 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. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for Nathan's Famous that investors need to be conscious of moving forward. Is Nathan's Famous not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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