The board of Williams-Sonoma, Inc. (NYSE:WSM) has announced that it will be increasing its dividend on the 26th of November to US$0.71. Based on the announced payment, the dividend yield for the company will be 1.3%, which is fairly typical for the industry.
Check out our latest analysis for Williams-Sonoma
Williams-Sonoma's Payment Has Solid Earnings Coverage
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. However, prior to this announcement, Williams-Sonoma's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.
Over the next year, EPS is forecast to expand by 3.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 19%, which is in the range that makes us comfortable with the sustainability of the dividend.
Williams-Sonoma Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2011, the dividend has gone from US$0.60 to US$2.84. This means that it has been growing its distributions at 17% per annum over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. Williams-Sonoma has impressed us by growing EPS at 31% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.
We Really Like Williams-Sonoma'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. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Williams-Sonoma that investors should take into consideration. We have also put together a list of global stocks with a solid dividend.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.