Readers wishing to buy Shoe Carnival, Inc. (NASDAQ: SCVL) for its dividend will have to act shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is one business day prior to the record date which is the date a company determines which shareholders are eligible to receive a dividend. It is important to know the ex-dividend date because any transaction in the share must have been settled by the registration date at the latest. This means that investors who buy Shoe Carnival shares from October 1 will not receive the dividend, which will be paid on October 18.
The company’s next dividend payment will be US $ 0.07 per share, compared to last year when the company paid a total of US $ 0.28 to shareholders. Based on the value of last year’s payouts, Shoe Carnival has a 0.8% return on the current share price of $ 33.65. Dividends are a major contributor to returns on investment for long-term holders, but only if the dividend continues to be paid. Accordingly, readers should always check whether Shoe Carnival has been able to increase its dividends or if the dividend could be reduced.
Dividends are usually paid out of business income, so if a business pays more than it earned, its dividend is usually at risk of being reduced. Shoe Carnival pays out only 5.9% of its after-tax profit, which is comfortably low and leaves plenty of leeway in the event of adverse events. A useful secondary check may be to assess whether Shoe Carnival has generated enough free cash flow to pay its dividend. The good thing is that dividends were well covered by free cash flow, with the company paying 6.6% of its cash flow last year.
It is positive to see that the Shoe Carnival dividend is covered by both earnings and cash flow, as this is usually a sign that the dividend is sustainable, and a lower payout ratio usually suggests a larger one. margin of safety before the dividend is cut.
Click here to view the company’s payout ratio, as well as analysts’ estimates of its future dividends.
NasdaqGS: Historical SCVL Dividend September 27, 2021
Have profits and dividends increased?
Companies with consistently rising earnings per share usually make the best dividend-paying stocks because they generally find it easier to raise dividends per share. If business goes into recession and the dividend is reduced, the company could experience a sharp drop in value. It is encouraging to see that Shoe Carnival has grown its revenue rapidly, up 40% per year over the past five years. Shoe Carnival’s earnings per share sprinted like the Road Runner on a day of track and field; barely stopping even for a cheeky “beep”. We also like him to reinvest most of his profits back into his business. ‘
Another key way to measure a company’s dividend outlook is to measure its historical rate of dividend growth. Shoe Carnival has generated dividend growth of 12% per year on average over the past nine years. Both earnings per share and dividends have been rising rapidly lately, which is great to see.
The bottom line
From a dividend perspective, should investors buy or avoid the Shoe Carnival? Shoe Carnival has grown its profits at a rapid rate and has a cautiously low payout ratio, which means it is reinvesting heavily in its business; a sterling combination. Shoe Carnival looks solid on this analysis overall, and we would definitely consider taking a closer look.
So while Shoe Carnival looks good from a dividend standpoint, it’s still worth being aware of the risks involved in this title. Know that Shoe Carnival shows 2 warning signs in our investment analysis, and 1 of them cannot be ignored …
If you are in the dividend-paying stock market, we recommend that you check out our list of the highest dividend-paying stocks with a yield above 2% and a future dividend.
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