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The board of Garmin Ltd. (NYSE:GRMN) has announced that it will pay a dividend of $0.73 per share on the 29th of December. The dividend yield will be 2.5% based on this payment which is still above the industry average.
Check out our latest analysis for Garmin
Garmin's Dividend Is Well Covered By Earnings
If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Garmin was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
The next year is set to see EPS grow by 31.5%. If the dividend continues on this path, the payout ratio could be 43% by next year, which we think can be pretty sustainable going forward.
Garmin Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2013, the dividend has gone from $1.80 total annually to $2.92. This works out to be a compound annual growth rate (CAGR) of approximately 5.0% a year over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.
The Dividend Has Growth Potential
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 9.6% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.
We Really Like Garmin'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. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.
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. Earnings growth generally bodes well for the future value of company dividend payments. See if the 8 Garmin analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.