Over the past 10 years Tiffany & Co (NYSE:TIF) has been paying dividends to shareholders. The company is currently worth US$10b, and now yields roughly 2.6%. Does Tiffany tick all the boxes of a great dividend stock? Below, I'll take you through my analysis.
See our latest analysis for Tiffany
5 checks you should use to assess a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has dividend per share amount increased over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does Tiffany fit our criteria?
Tiffany has a trailing twelve-month payout ratio of 58%, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 43%, leading to a dividend yield of 2.7%. However, EPS should increase to $5.1, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you're eyeing out is reliable in its payments. TIF has increased its DPS from $0.68 to $2.2 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes TIF a true dividend rockstar.
Compared to its peers, Tiffany generates a yield of 2.6%, which is high for Specialty Retail stocks but still below the market's top dividend payers.
Next Steps:
Considering the dividend attributes we analyzed above, Tiffany is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three relevant factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for TIF’s future growth? Take a look at our free research report of analyst consensus for TIF’s outlook.
- Valuation: What is TIF worth today? Even if the stock is a cash cow, it's not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether TIF is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.