Marriott Vacations Worldwide's (NYSE:VAC) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Marriott Vacations Worldwide Corporation (NYSE:VAC) has announced that it will be increasing its dividend by 5.6% on the 4th of January to $0.76, up from last year's comparable payment of $0.72. This takes the dividend yield to 3.5%, which shareholders will be pleased with.

See our latest analysis for Marriott Vacations Worldwide

Marriott Vacations Worldwide's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, prior to this announcement, Marriott Vacations Worldwide'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.

The next year is set to see EPS grow by 56.3%. If the dividend continues on this path, the payout ratio could be 24% by next year, which we think can be pretty sustainable going forward.

Marriott Vacations Worldwide's Dividend Has Lacked Consistency

Looking back, Marriott Vacations Worldwide's dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The annual payment during the last 9 years was $1.00 in 2014, and the most recent fiscal year payment was $2.88. This means that it has been growing its distributions at 12% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Marriott Vacations Worldwide has been growing its earnings per share at 13% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Marriott Vacations Worldwide Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for Marriott Vacations Worldwide you should be aware of, and 1 of them is a bit unpleasant. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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