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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Natural Grocers by Vitamin Cottage, Inc. (NYSE:NGVC) is about to trade ex-dividend in the next 3 days. Investors can purchase shares before the 27th of November in order to be eligible for this dividend, which will be paid on the 16th of December.
The upcoming dividend for Natural Grocers by Vitamin Cottage will put a total of US$2.07 per share in shareholders' pockets, up from last year's total dividends of US$0.28. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Natural Grocers by Vitamin Cottage has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Natural Grocers by Vitamin Cottage
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. That's why it's good to see Natural Grocers by Vitamin Cottage paying out a modest 31% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. The good news is it paid out just 17% of its free cash flow in the last year.
It's positive to see that Natural Grocers by Vitamin Cottage'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.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Natural Grocers by Vitamin Cottage earnings per share are up 4.3% per annum over the last five years. Earnings per share growth in recent times has not been a standout. Yet there are several ways to grow the dividend, and one of them is simply that the company may choose to pay out more of its earnings as dividends.
Unfortunately Natural Grocers by Vitamin Cottage has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.