Nordstrom’s (NYSE:JWN) Dividend Will Be $0.19

Nordstrom, Inc. (NYSE:JWN) has announced that it will pay a dividend of $0.19 per share on the 29th of March. This means the annual payment is 3.8% of the current stock price, which is above the average for the industry.

See our latest analysis for Nordstrom

Nordstrom’s Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn’t mean much if it can’t be sustained. Prior to this announcement, Nordstrom’s 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.

The next year is set to see EPS grow by 71.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 23% by next year, which is in a pretty sustainable range.

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Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of $1.08 in 2013 to the most recent total annual payment of $0.76. The dividend has shrunk at around 3.5% a year during that period. Generally, we don’t like to see a dividend that has been declining over time as this can degrade shareholders’ returns and indicate that the company may be running into problems.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Nordstrom’s earnings per share has shrunk at 10% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn’t be feeling too comfortable.

In Summary

Overall, it’s nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn’t been great. We would probably look elsewhere for an income investment.

Story continues

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we’ve picked out 2 warning signs for Nordstrom that investors should know about before committing capital to this stock. Is Nordstrom 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.

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