Regular readers will know we love our dividends at Simply Wall St, which is why it’s exciting to see Winmark Corporation (NASDAQ: WINA) is set to trade ex-dividend within the next four days. 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 Winmark shares from November 9th will not receive the dividend, which will be paid on December 1st.

The company’s next dividend payment will be US $ 7.95 per share, compared to last year when the company paid a total of US $ 9.30 to shareholders. Based on the value of last year’s payouts, the Winmark stock has a rolling return of around 3.7% on the current stock price of $ 248.98. If you are buying this company for its dividend, you should know if Winmark’s dividend is reliable and sustainable. It is therefore necessary to check whether dividend payments are covered and whether profits are growing.

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. Winmark pays only 14% of its profit after tax, which is comfortably low and leaves a lot of leeway in the event of adverse events. A useful secondary check can be to assess whether Winmark has generated enough free cash flow to pay its dividend. Fortunately, he only paid 11% of his free cash flow last year.

It is positive to see that the Winmark 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 greater margin of profitability. security before the dividend is cut.

Click on here to see how much of its profit Winmark has paid off in the past 12 months.

NasdaqGM: WINA Historical Dividend November 4, 2021

Have profits and dividends increased?

Companies with strong growth prospects generally make the best dividend payers because dividends are easier to grow when earnings per share improve. If business goes into recession and the dividend is reduced, the company could experience a sharp drop in value. For this reason, we are pleased to see that Winmark’s earnings per share have grown 15% per year over the past five years. The company managed to increase its profits at a rapid rate, while reinvesting most of the profits back into the company. Fast-growing companies that reinvest heavily are attractive from a dividend standpoint, especially since they can often increase the payout ratio later.

Most investors primarily assess a company’s dividend prospects by checking the historical rate of dividend growth. Winmark has generated dividend growth of 61% per year on average over the past 10 years. It is exciting to see that earnings and dividends per share have grown rapidly over the past few years.

The bottom line

Is Winmark worth buying for its dividend? Winmark has grown its profits at a rapid rate and has a cautiously low payout ratio, which implies that it is reinvesting heavily in its business; a sterling combination. There is a lot to love about Winmark, and we would prioritize taking a closer look.

With this in mind, an essential part of in-depth stock research is being aware of the risks stocks currently face. We have identified 3 warning signs with Winmark (at least 1 which is potentially serious), and understanding them should be part of your investment process.

However, we don’t recommend simply buying the first dividend stock you see. here is a list of interesting dividend-paying stocks with a yield above 2% and a future dividend.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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