Dillard's' (NYSE:DDS) Dividend Will Be $0.20

The board of Dillard's, Inc. (NYSE:DDS) has announced that it will pay a dividend of $0.20 per share on the 31st of July. The dividend yield will be 5.5% based on this payment which is still above the industry average.

View our latest analysis for Dillard's

Dillard's Is Paying Out More Than It Is Earning

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, Dillard's' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to fall by 65.7% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 105%, which could put the dividend under pressure if earnings don't start to improve.

Dillard's Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of $0.20 in 2013 to the most recent total annual payment of $15.80. This works out to be a compound annual growth rate (CAGR) of approximately 55% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Dillard's has been growing its earnings per share at 44% a year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like Dillard's' Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. 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. As an example, we've identified 1 warning sign for Dillard's that you should be aware of before investing. 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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