Winmark Corporation (NASDAQ:WINA) has announced that it will be increasing its dividend on the 1st of June to US$0.70, which will be 56% higher than last year. This takes the dividend yield from 4.5% to 4.6%, which shareholders will be pleased with.
Winmark's Dividend Is Well Covered By Earnings
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, Winmark's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
EPS is set to grow by 15.7% over the next year if recent trends continue. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 90%, which is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.
Winmark Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the dividend has gone from US$0.12 to US$9.30. This means that it has been growing its distributions at 55% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. Winmark has impressed us by growing EPS at 16% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.
Winmark Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that Winmark is a strong income stock thanks to its track record and growing earnings. 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.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for Winmark (of which 1 is potentially serious!) you should know about. Is Winmark not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
What are the risks and opportunities for Winmark?
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Winmark Corporation, together with its subsidiaries, operates as a franchisor of retail store concepts that buy, sell, trade, and consign used merchandise primarily in the United States and Canada.
Solid track record average dividend payer.