Dollar General (NYSE:DG) Is Paying Out A Dividend Of $0.59

The board of Dollar General Corporation (NYSE:DG) has announced that it will pay a dividend on the 23rd of April, with investors receiving $0.59 per share. This payment means that the dividend yield will be 1.6%, which is around the industry average.

View our latest analysis for Dollar General

Dollar General’s Earnings Easily Cover The Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Before making this announcement, Dollar General was easily earning enough to cover the dividend. 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 22.4% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 29% by next year, which is in a pretty sustainable range.

Dollar General Is Still Building Its Track Record

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 9 years was $0.88 in 2015, and the most recent fiscal year payment was $2.36. This means that it has been growing its distributions at 12% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn’t be inclined to rely on it until a longer track record can be developed.

Dollar General May Find It Hard To Grow The Dividend

The company’s investors will be pleased to have been receiving dividend income for some time. Earnings per share has been crawling upwards at 4.8% per year. While growth may be thin on the ground, Dollar General could always pay out a higher proportion of earnings to increase shareholder returns.

Our Thoughts On Dollar General’s Dividend

Overall, we think Dollar General is a solid choice as a dividend stock, even though the dividend wasn’t raised this year. The dividend has been at reasonable levels historically, but that hasn’t translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we’ve picked out 3 warning signs for Dollar General that investors should take into consideration. Is Dollar General not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.