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Guess?, Inc. (NYSE:GES) will pay a dividend of $0.30 on the 27th of December. The dividend yield will be 7.3% based on this payment which is still above the industry average.
Check out our latest analysis for Guess?
Estimates Indicate Guess?'s Could Struggle to Maintain Dividend Payments In The Future
A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Guess?'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.
Earnings per share is forecast to rise by 82.7% over the next year. If the dividend continues on its recent course, the payout ratio in 12 months could be 106%, which is a bit high and could start applying pressure to the balance sheet.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was $0.80 in 2014, and the most recent fiscal year payment was $1.20. This implies that the company grew its distributions at a yearly rate of about 4.1% over that duration. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.
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 impressed us by growing EPS at 28% per year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.
Guess? Looks Like A Great Dividend Stock
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 in all, this checks a lot of the boxes we look for when choosing an income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 3 warning signs for Guess? that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield 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.