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Tapestry, Inc.'s (NYSE:TPR) dividend will be increasing from last year's payment of the same period to $0.30 on 26th of September. This takes the dividend yield to 3.3%, which shareholders will be pleased with.
See our latest analysis for Tapestry
Tapestry's Earnings Easily Cover The Distributions
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Tapestry was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.
Over the next year, EPS is forecast to expand by 62.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 16%, which is in the range that makes us comfortable with the sustainability of the dividend.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of $0.90 in 2012 to the most recent total annual payment of $1.20. This implies that the company grew its distributions at a yearly rate of about 2.9% over that duration. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.
The Dividend Looks Likely To Grow
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Tapestry has seen EPS rising for the last five years, at 11% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Tapestry's prospects of growing its dividend payments in the future.
Tapestry Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that Tapestry is a strong income stock thanks to its track record and growing earnings. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Tapestry that investors should know about before committing capital to this stock. Is Tapestry not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.