Garmin Ltd. (NYSE:GRMN) will pay a dividend of $0.90 on the 26th of December. The payment will take the dividend yield to 1.5%, which is in line with the average for the industry.
Garmin’s Projected Earnings Seem Likely To Cover Future Distributions
Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, Garmin’s dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
Looking forward, earnings per share is forecast to rise by 17.5% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 38%, which is in the range that makes us comfortable with the sustainability of the dividend.
Garmin Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $1.92 in 2015, and the most recent fiscal year payment was $3.60. This works out to be a compound annual growth rate (CAGR) of approximately 6.5% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.
The Dividend Looks Likely To Grow
The company’s investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Garmin has grown earnings per share at 11% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.
Garmin Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that Garmin 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.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we’ve picked out 1 warning sign for Garmin that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.