Guess''s (NYSE:GES) Upcoming Dividend Will Be Larger Than Last Year's

Guess', Inc. (NYSE:GES) has announced that it will be increasing its periodic dividend on the 23rd of June to $0.30, which will be 33% higher than last year's comparable payment amount of $0.225. This takes the dividend yield to 4.6%, which shareholders will be pleased with.

View our latest analysis for Guess'

Guess''s Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, prior to this announcement, Guess''s dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS could expand by 47.8% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 26% by next year, which is in a pretty sustainable range.

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. Since 2013, the annual payment back then was $0.80, compared to the most recent full-year payment of $0.90. This implies that the company grew its distributions at a yearly rate of about 1.2% over that duration. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Guess' has seen EPS rising for the last five years, at 48% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Guess' Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Guess' is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Guess' that investors should know about before committing capital to this stock. Is Guess' not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.