Yahoo Finance Nathan's Famous (NASDAQ:NATH) Is Paying Out A Dividend Of $0.50
Nathan's Famous, Inc. (NASDAQ:NATH) has announced that it will pay a dividend of $0.50 per share on the 2nd of July. Based on this payment, the dividend yield on the company's stock will be 3.0%, which is an attractive boost to shareholder returns.
View our latest analysis for Nathan's Famous
Nathan's Famous' Payment Has Solid Earnings Coverage
If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Nathan's Famous' dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
EPS is set to fall by 1.3% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 49%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
Nathan's Famous Doesn't Have A Long Payment History
Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The annual payment during the last 6 years was $1.00 in 2018, and the most recent fiscal year payment was $2.00. This means that it has been growing its distributions at 12% per annum over that time. Nathan's Famous has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.
Dividend Growth May Be Hard To Achieve
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. Nathan's Famous hasn't seen much change in its earnings per share over the last five years.
Our Thoughts On Nathan's Famous' Dividend
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Nathan's Famous' payments, as there could be some issues with sustaining them into the future. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. Overall, we don't think this company has the makings of a good income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 3 warning signs for Nathan's Famous that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
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