Stock Analysis

Winmark (NASDAQ:WINA) Is Increasing Its Dividend To US$0.70

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NasdaqGM:WINA
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The board of Winmark Corporation (NASDAQ:WINA) has announced that it will be increasing its dividend by 56% on the 1st of June to US$0.70. This will take the annual payment from 4.2% to 4.3% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Winmark

Winmark's Earnings Easily Cover the Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Winmark was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Earnings per share could rise by 15.7% over the next year if things go the same way as they have for the last few years. If recent patterns in the dividend continue, the payout ratio in 12 months could be 90% which is a bit high but can definitely be sustainable.

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NasdaqGM:WINA Historic Dividend April 18th 2022

Winmark Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The first annual payment during the last 10 years was US$0.12 in 2012, and the most recent fiscal year payment was US$9.30. This implies that the company grew its distributions at a yearly rate of about 55% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see Winmark has been growing its earnings per share at 16% a 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.

We Really Like Winmark's Dividend

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. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Winmark has 2 warning signs (and 1 which is significant) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

What are the risks and opportunities for Winmark?

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.

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Rewards

  • Earnings grew by 12.1% over the past year

Risks

  • Negative shareholders equity

  • Has a high level of debt

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