Bath & Body Works (NYSE:BBWI) Is Due To Pay A Dividend Of $0.20

The board of Bath & Body Works, Inc. (NYSE:BBWI) has announced that it will pay a dividend of $0.20 per share on the 1st of September. Based on this payment, the dividend yield will be 2.1%, which is fairly typical for the industry.

View our latest analysis for Bath & Body Works

Bath & Body Works' Dividend Is Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. However, prior to this announcement, Bath & Body Works' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 36.4%. If the dividend continues on this path, the payout ratio could be 18% by next year, which we think can be pretty sustainable going forward.

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 dividend has gone from an annual total of $5.00 in 2013 to the most recent total annual payment of $0.80. Dividend payments have fallen sharply, down 84% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth May Be Hard To Achieve

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. However, Bath & Body Works' EPS was effectively flat over the past five years, which could stop the company from paying more every year.

Our Thoughts On Bath & Body Works' Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think Bath & Body Works is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 4 warning signs for Bath & Body Works you should be aware of, and 1 of them doesn't sit too well with us. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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