Tapestry (NYSE:TPR) Is Increasing Its Dividend To $0.30

Tapestry, Inc. (NYSE:TPR) has announced that it will be increasing its dividend from last year’s comparable payment on the 26th of September to $0.30. This will take the annual payment to 3.3% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Tapestry

Tapestry’s Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn’t matter if the payment isn’t sustainable. Before making this announcement, Tapestry was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 62.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 16% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn’t look great with cuts in the past. Since 2012, the annual payment back then was $0.90, compared to the most recent full-year payment of $1.20. This means that it has been growing its distributions at 2.9% per annum over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company’s earnings are not consistent.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it’s even more important to see if earnings per share is growing. Tapestry has impressed us by growing EPS at 11% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Tapestry’s prospects of growing its dividend payments in the future.

Tapestry Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. For instance, we’ve picked out 1 warning sign for Tapestry that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield 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.