Read This Before Considering DICK'S Sporting Goods, Inc. (NYSE:DKS) For Its Upcoming US$0.28 Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that DICK'S Sporting Goods, Inc. (NYSE:DKS) is about to go ex-dividend in just 4 days. You can purchase shares before the 12th of December in order to receive the dividend, which the company will pay on the 31st of December.

DICK'S Sporting Goods's next dividend payment will be US$0.28 per share, and in the last 12 months, the company paid a total of US$1.10 per share. Last year's total dividend payments show that DICK'S Sporting Goods has a trailing yield of 2.4% on the current share price of $46.2. If you buy this business for its dividend, you should have an idea of whether DICK'S Sporting Goods's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for DICK'S Sporting Goods

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. That's why it's good to see DICK'S Sporting Goods paying out a modest 29% of its earnings. A useful secondary check can be to evaluate whether DICK'S Sporting Goods generated enough free cash flow to afford its dividend. It paid out 86% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see DICK'S Sporting Goods earnings per share are up 5.9% per annum over the last five years. Decent historical earnings per share growth suggests DICK'S Sporting Goods has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last nine years, DICK'S Sporting Goods has lifted its dividend by approximately 9.2% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Is DICK'S Sporting Goods worth buying for its dividend? Earnings per share growth has been modest, and it's interesting that DICK'S Sporting Goods is paying out less than half of its earnings and more than half its cash flow to shareholders in the form of dividends. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

Ever wonder what the future holds for DICK'S Sporting Goods? See what the 21 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

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