Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Village Super Market, Inc. (NASDAQ:VLGE.A) is about to trade ex-dividend in the next 4 days. This means that investors who purchase shares on or after the 2nd of October will not receive the dividend, which will be paid on the 24th of October.
Village Super Market's upcoming dividend is US$0.3 a share, following on from the last 12 months, when the company distributed a total of US$1.0 per share to shareholders. Based on the last year's worth of payments, Village Super Market has a trailing yield of 3.8% on the current stock price of $26.59. If you buy this business for its dividend, you should have an idea of whether Village Super Market's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
View our latest analysis for Village Super Market
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Village Super Market is paying out an acceptable 58% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Village Super Market generated enough free cash flow to afford its dividend. Fortunately, it paid out only 37% of its free cash flow in the past year.
It's positive to see that Village Super Market's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see how much of its profit Village Super Market paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're not enthused to see that Village Super Market's earnings per share have remained effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Village Super Market has delivered 10% dividend growth per year on average over the past ten years.