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The board of Garmin Ltd. (NYSE:GRMN) has announced that it will be paying its dividend of $0.90 on the 27th of June, an increased payment from last year's comparable dividend. Based on this payment, the dividend yield for the company will be 1.4%, which is fairly typical for the industry.
Garmin's Future Dividend Projections Appear Well Covered By Earnings
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, Garmin's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
Looking forward, earnings per share is forecast to rise by 31.5% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 34% by next year, which is in a pretty sustainable range.
Check out our latest analysis for Garmin
Garmin Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of $1.92 in 2015 to the most recent total annual payment of $3.00. This works out to be a compound annual growth rate (CAGR) of approximately 4.6% a year over that time. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.
Garmin Could Grow Its Dividend
Investors could be attracted to the stock based on the quality of its payment history. Garmin has impressed us by growing EPS at 7.9% 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
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Garmin that you should be aware of before investing. Is Garmin 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.