Pet Valu Holdings (TSE:PET) Has Affirmed Its Dividend Of CA$0.12

The board of Pet Valu Holdings Ltd. (TSE:PET) has announced that it will pay a dividend on the 15th of September, with investors receiving CA$0.12 per share. Including this payment, the dividend yield on the stock will be 1.3%, which is a modest boost for shareholders' returns.

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Pet Valu Holdings' Projected Earnings Seem Likely To Cover Future Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before making this announcement, Pet Valu Holdings 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.

Over the next year, EPS is forecast to expand by 51.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 31%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for Pet Valu Holdings

Pet Valu Holdings Doesn't Have A Long Payment History

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The annual payment during the last 4 years was CA$0.04 in 2021, and the most recent fiscal year payment was CA$0.48. This means that it has been growing its distributions at 86% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

Pet Valu Holdings May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. However, Pet Valu Holdings' EPS was effectively flat over the past three years, which could stop the company from paying more every year.

Our Thoughts On Pet Valu Holdings' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Pet Valu Holdings' payments, as there could be some issues with sustaining them into the future. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think Pet Valu Holdings is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Pet Valu Holdings that investors should know about before committing capital to this stock. 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.