Last update on 2024-06-27

Ross Stores (ROST) - Dividend Analysis (Final Score: 6/8)

Uncover Ross Stores (ROST) Dividend Analysis with a solid score of 6/8. Learn why ROST remains a stable choice for dividend-focused investors.

Short Analysis - Dividend Score: 6

We're running Ross Stores (ROST) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

Ross Stores (ROST) underwent an assessment based on its dividend policy using an 8-criteria scoring system and scored 6 out of 8. The criteria evaluated include dividend yield, average annual growth rate, average annual payout ratio, dividend coverage by earnings and cash flow, stability in dividends since inception, duration of dividend payments, and reliable stock repurchases. Ross Stores has shown a competitive dividend yield of 0.9683%, robust despite economic volatility. The average dividend growth rate is strong at 31.9953%, though it fluctuates significantly. The payout ratio is healthy at 42.13%, well below the 65% threshold. Dividends are well covered by both earnings and cash flow, although there's volatility during certain years. The company has been paying dividends for 25 years, underscoring stability, and has consistently reduced its share count, reflecting strong confidence in its long-term value. Overall, ROST shows a generally positive dividend policy marked by resilience and prudent management, despite some fluctuations during financial turbulence.

Insights for Value Investors Seeking Stable Income

Based on the analysis, Ross Stores (ROST) appears to be a solid choice for investors seeking stable and growing dividends. While there is some volatility and deviation from the industry average dividend yield, the long-term trends indicate strong overall performance. The company’s ability to maintain a reasonable payout ratio, cover dividends with earnings and cash flow, and its consistent history of paying and increasing dividends makes ROST a dependable stock for income-focused investors. Therefore, it's worth considering as a potential investment.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield evaluates the annual dividends paid by a company in relation to its stock price. It is crucial for income-focused investors because it helps determine the return on investment derived solely from dividends.

With a dividend yield of 0.9683%, Ross Stores (ROST) is only slightly below the industry average of 0.98%. Over the last 20 years, ROST's dividend yield has fluctuated significantly but has generally remained competitive. For instance, between 2008 and 2012, the dividend yield often surpassed the 1% mark, demonstrating resiliency during financially tumultuous periods. A dip to 0.2321% in 2020 can be attributed to the global pandemic's impact, yet a substantial recovery to 0.9683% by 2023 portrays strong dividend sustainability. Although 0.9683% is marginally below the industry norm, it is a robust yield, indicating reliable shareholder returns. The overall trend in dividend yield, while trailing the industry at some points, manifests consistency under varying economic conditions.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate measures the annualized percentage rate of growth of a company's dividend. A growth rate higher than 5% is generally considered healthy as it suggests that the company is increasing shareholder returns and has positive future prospects.

Based on the Dividend Ratio data provided, Ross Stores (ROST) seems to have varied growth rates over the past 20 years. The crucial figures include an outstanding 300% growth in 2021 and a significant drop of -72.0588% in 2020, likely due to the COVID-19 pandemic. Such extreme fluctuations indicate volatility. Importantly, when focusing on the ability to consistently deliver a growth rate greater than 5%, the average dividend ratio of 31.9953% substantially exceeds the criteria mark. This high average, despite some down years, indicates a generally positive dividend growth trend, suggesting that ROST has a relatively strong dividend payout consistent with a healthy, growing company. However, the volatility needs to be taken into account, as it can affect future performance stability.

Average annual Payout Ratio lower than 65% in the last 20 years?

The Average Payout Ratio of a company indicates the percentage of earnings distributed to shareholders as dividends. A ratio below 65% suggests that the company is retaining enough earnings for growth and stability.

Examining the payout ratio of Ross Stores over the past 20 years, we observe an average of 42.13%. This ratio is comfortably below the 65% cutoff, implying that Ross Stores has managed its dividend payouts prudently while maintaining sufficient capital for future expansion and unforeseen contingencies. Notable is the unusual spike to 470.49% in 2021, likely influenced by exceptional circumstances such as economic disruptions due to the COVID-19 pandemic. Excluding this anomaly, the trend indicates strong financial health and dividend sustainability, marking a positive trend for this criterion.

Dividends Well Covered by Earnings?

Dividends covered by earnings are a crucial measure indicating a company's ability to sustain its dividend payments. A higher coverage ratio suggests a healthy earnings buffer to maintain or even increase dividends.

Analyzing Ross Stores (ROST) from 2003 to 2023, we see that dividend coverage ratio fluctuates. The EPS to DPS ratio under 1 notably illustrates years where dividends were covered by earnings but yielded modest margins. During 2019-2021, coverage varied a lot: dipped to 0.24 in 2021 due to economic impacts, then surged to 4.70 in 2021, highlighting earnings volatility yet robust dividend security. Evident negative changes in 2022 squeezed coverage (0.304). While having an overall good trend, financial resilience must be balanced due to those volatilities.

Dividends Well Covered by Cash Flow?

Why is it important to consider if dividends are well covered by cash flow?

Dividends are considered well covered by cash flow when a company generates sufficient free cash flow to support its dividend payouts. This indicates that the company is in a financially healthy position and can sustain or grow its dividend payments without resorting to debt or compromising its capital expenditure plans. This is crucial for long-term investors who rely on dividends for income, as it suggests stability and reliability in dividend payments.

Stable Dividends Since the Company Began Paying Dividends?

Explain the criterion for Ross Stores (ROST) and why it is important to consider

Stability in dividend payments, where the dividend per share did not drop by more than 20% over the past two decades, is of utmost importance for income-seeking investors.

Dividends Paid for Over 25 Years?

Explanation of companies paying dividends for over 25 years and why it is important to consider for analysis of Ross Stores (ROST)

The data series confirms that Ross Stores (ROST) has been paying dividends consistently since 1998 up to 2023, which totals 25 years. This established history of dividend payments underscores a commitment to returning value to shareholders. The increase in dividend per share from $0.0138 in 1998 to $1.34 in 2023 illustrates a robust growth trajectory. The drastic dip in 2020 ($0.285) can be attributed to the pandemic but the rebound in subsequent years ($1.14 and $1.24) suggests strong resiliency. This trend is favourable and signifies stability and reliability in dividend policy, which is essential for income-focused investors or those seeking consistent returns.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for Ross Stores (ROST) and why it is important to consider

Reliable stock repurchases imply a company's management believes in the long-term value of its shares. Over 20 years, Ross Stores consistently reduced its shares from 637.97 million in 2003 to 343.45 million in 2023. This steady decrease, averaging a repurchase rate of -3.0441% annually, demonstrates consistent confidence and is a positive long-term indicator for investors.