Readers hoping to buy G-III Apparel Group, Ltd. (NASDAQ:GIII) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Thus, you can purchase G-III Apparel Group's shares before the 15th of September in order to receive the dividend, which the company will pay on the 29th of September.
The company's upcoming dividend is US$0.10 a share, following on from the last 12 months, when the company distributed a total of US$0.40 per share to shareholders. Last year's total dividend payments show that G-III Apparel Group has a trailing yield of 1.4% on the current share price of US$27.67. If you buy this business for its dividend, you should have an idea of whether G-III Apparel Group's dividend is reliable and sustainable. So we need to investigate whether G-III Apparel Group can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. G-III Apparel Group paid out just 9.4% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. The good news is it paid out just 4.6% of its free cash flow in the last year.
It's positive to see that G-III Apparel Group's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
View our latest analysis for G-III Apparel Group
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see G-III Apparel Group has grown its earnings rapidly, up 45% a year for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, G-III Apparel Group looks like a promising growth company.
Unfortunately G-III Apparel Group has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.
To Sum It Up
From a dividend perspective, should investors buy or avoid G-III Apparel Group? We love that G-III Apparel Group is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. There's a lot to like about G-III Apparel Group, and we would prioritise taking a closer look at it.
While it's tempting to invest in G-III Apparel Group for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 1 warning sign for G-III Apparel Group you should know about.
If you're in the market for strong dividend payers, we recommend checking 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.