Village Super Market, Inc. (NASDAQ:VLGE.A) is about to trade ex-dividend in the next 4 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company’s books in order to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company’s books on the record date. Therefore, if you purchase Village Super Market’s shares on or after the 4th of January, you won’t be eligible to receive the dividend, when it is paid on the 26th of January.
The company’s upcoming dividend is US$0.25 a share, following on from the last 12 months, when the company distributed a total of US$1.00 per share to shareholders. Based on the last year’s worth of payments, Village Super Market stock has a trailing yield of around 4.2% on the current share price of $23.59. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
Check out our latest analysis for Village Super Market
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That’s why it’s good to see Village Super Market paying out a modest 48% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The good news is that it paid out just 24% of its free cash flow in the last 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?
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. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we’re encouraged by the steady growth at Village Super Market, with earnings per share up 5.0% on average over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. Organizations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Village Super Market has raised its dividend by approximately 1.6% a year on average.
Has Village Super Market got what it takes to maintain its dividend payments? Earnings per share have been growing moderately, and Village Super Market is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Village Super Market is being conservative with its dividend payouts and could still perform reasonably over the long run. There’s a lot to like about Village Super Market, and we would prioritize taking a closer look at it.
Keen to explore more data on Village Super Market’s financial performance? Check out our visualization of its historical revenue and earnings growth.
Generally, we wouldn’t recommend just buying the first dividend stock you see. Here’s a curated list of interesting stocks that are strong dividend payers.
What are the risks and opportunities for Village Super Market?
Village Super Market, Inc. operates a chain of supermarkets in the United States.Show more
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Trading at 72.7% below our estimate of its fair value
Earnings grew by 28.2% over the past year
No risks detected for VLGE.A from our risks checks.
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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 into account 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.