The board of Village Super Market, Inc. (NASDAQ:VLGE.A) has announced that it will pay a dividend on the 25th of January, with investors receiving $0.25 per share. This makes the dividend yield 4.0%, which will augment investor returns quite nicely.

See our latest analysis for Village Super Market

Village Super Market's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, prior to this announcement, Village Super Market's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS could expand by 10.8% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 28% by next year, which is in a pretty sustainable range.

Village Super Market Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The last annual payment of $1.00 was flat on the annual payment from10 years ago. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Village Super Market has been growing its earnings per share at 11% a year over the past five years. Village Super Market definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Village Super Market Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

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. As an example, we've identified 1 warning sign for Village Super Market that you should be aware of before investing. 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.