Vector Group (NYSE:VGR) Will Pay A Dividend Of US$0.20

By
Simply Wall St
Published
December 03, 2021
NYSE:VGR
Source: Shutterstock

The board of Vector Group Ltd. (NYSE:VGR) has announced that it will pay a dividend of US$0.20 per share on the 20th of December. This means that the annual payment will be 5.1% of the current stock price, which is in line with the average for the industry.

See our latest analysis for Vector Group

Vector Group's Payment Has Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. The last dividend was quite easily covered by Vector Group's earnings. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 21.3% if recent trends continue. If the dividend continues on this path, the payout ratio could be 48% by next year, which we think can be pretty sustainable going forward.

historic-dividend
NYSE:VGR Historic Dividend December 4th 2021

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The first annual payment during the last 10 years was US$1.03 in 2011, and the most recent fiscal year payment was US$0.80. This works out to be a decline of approximately 2.5% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Vector Group has impressed us by growing EPS at 21% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Vector Group could prove to be a strong dividend payer.

Vector Group Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 3 warning signs for Vector Group you should be aware of, and 2 of them make us uncomfortable. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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