Investing in dividend-paying stocks can be a great way to generate passive income and build wealth over time. But with so many choices available, it can be difficult to decide which ones to add to your portfolio. One dividend-paying stock that I consider exceptional and worthy of closer examination is Dick Sporting Goods (SDKs -1.38%). The American sporting goods retailer is an excellent allocator of capital and has rewarded its shareholders with huge dividend growth.
Here are several reasons why income-seeking investors may want to put Dick’s at the top of their stock watchlists.
Impressive dividend growth
Along with announcing record 2022 results last week, the company surprised investors with a 105% increase in its dividend. Dick’s new quarterly payout is $1 per share, which at the current share price makes him attractively valued. dividend yield 2.8%.
Management is extremely confident about Dick’s future. “In 2023, we will grow both our sales and earnings through positive comps,” CEO Lauren Hobart said in the company’s fourth quarter earnings release. Its momentum, Hobart added, has positioned Dick’s to simultaneously accelerate investment in its business “to fuel long-term growth opportunities and also return significant capital to shareholders.” In addition, the dividend increase reflects management’s “strong belief” in the company’s “structurally higher sales and earnings”, she said.
This robust business momentum prepares Dick’s for further dividend increases in the years to come. Making the case for expecting further increases even stronger, Dick’s boasts of an exceptionally low rate The payout ratio. Over the past 12 months, Dick’s has only distributed 15.6% of its earnings as dividends.
More than the eye can discern
Dick’s has an impressive dividend history, dating back over a decade.
Here’s some background on its history that highlights just how well this company is doing, despite an uncertain market. In 2020, Dick’s said it would suspend dividend payments after several of its stores closed at the start of the pandemic. But he didn’t miss a payment after all. Instead, he reinstated the program, citing extremely strong sales after those stores reopened.
Another key aspect of Dick’s shareholder reward history — and a part of it that some investors may overlook — is that he occasionally pays special dividends in addition to his regular dividends. In 2012 and 2021, for example, Dick’s paid shareholders special dividends of $2 and $5.50, respectively. Highlighting the importance of the 2021 special dividend, it is more than five times the increased quarterly dividend that Dick’s just announced.
Not only does Dick’s Sporting Goods offer a reliable dividend, but it has also seen impressive payout growth in recent years. The company is also benefiting from strong cash flow and continues to pursue strategic capital allocation initiatives that should benefit shareholders over the long term.
As always, do your own due diligence and do your own research before making any investment decisions. But if you’re looking to add a reliable dividend payer to your portfolio, Dick’s Sporting Goods is definitely worth considering.
Daniel Sparks has no position in the stocks mentioned. Its clients may hold shares of the companies mentioned. The Motley Fool has no position in the stocks mentioned. The Motley Fool has a disclosure policy.