PriceSmart's (NASDAQ:PSMT) Dividend Will Be $0.58

PriceSmart, Inc. (NASDAQ:PSMT) will pay a dividend of $0.58 on the 30th of August. This takes the annual payment to 1.5% of the current stock price, which is about average for the industry.

Check out our latest analysis for PriceSmart

PriceSmart's Earnings Easily Cover The Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, prior to this announcement, PriceSmart'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.

Looking forward, earnings per share is forecast to rise by 11.2% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 50%, which is in the range that makes us comfortable with the sustainability of the dividend.

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PriceSmart Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.70 in 2014 to the most recent total annual payment of $1.16. This means that it has been growing its distributions at 5.2% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

We Could See PriceSmart's Dividend Growing

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that PriceSmart has grown earnings per share at 9.8% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for PriceSmart's prospects of growing its dividend payments in the future.

PriceSmart Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that PriceSmart is a strong income stock thanks to its track record and growing earnings. 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 of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for PriceSmart that investors need to be conscious of moving forward. 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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