The board of Garmin Ltd. (NYSE:GRMN) has announced that the dividend on 27th of June will be increased to $0.90, which will be 20% higher than last year's payment of $0.75 which covered the same period. The payment will take the dividend yield to 1.6%, which is in line with the average for the industry.
Our free stock report includes 1 warning sign investors should be aware of before investing in Garmin. Read for free now.Estimates Indicate Garmin's Dividend Coverage Likely To Improve
Solid dividend yields are great, but they only really help us if the payment is sustainable. However, Garmin's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.
Looking forward, earnings per share is forecast to rise by 29.5% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 33% by next year, which is in a pretty sustainable range.
View our latest analysis for Garmin
Garmin Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $1.92 in 2015, and the most recent fiscal year payment was $3.00. This means that it has been growing its distributions at 4.6% per annum over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.
We Could See Garmin's Dividend Growing
Investors could be attracted to the stock based on the quality of its payment history. Garmin has seen EPS rising for the last five years, at 8.3% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Garmin's prospects of growing its dividend payments in the future.
We Really Like Garmin's Dividend
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Garmin that you should be aware of before investing. Is Garmin not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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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.