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Nathan's Famous, Inc. (NASDAQ:NATH) will pay a dividend of $0.50 on the 6th of December. This means the dividend yield will be fairly typical at 2.2%.
View our latest analysis for Nathan's Famous
Nathan's Famous' Future Dividend Projections Appear Well Covered By Earnings
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Before making this announcement, Nathan's Famous was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.
Looking forward, earnings per share could rise by 1.1% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 43% by next year, which is in a pretty sustainable range.
Nathan's Famous Is Still Building Its Track Record
It is great to see that Nathan's Famous has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2018, the dividend has gone from $1.00 total annually to $2.00. This means that it has been growing its distributions at 12% per annum over that time. Nathan's Famous has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.
The Dividend's Growth Prospects Are Limited
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately, Nathan's Famous' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. If Nathan's Famous is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.
Our Thoughts On Nathan's Famous' Dividend
Overall, a consistent dividend is a good thing, and we think that Nathan's Famous has the ability to continue this into the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.
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. For instance, we've picked out 1 warning sign for Nathan's Famous that investors should take into consideration. 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.