An in-depth analysis of Gap Inc's dividend performance and sustainability
Gap Inc (GPS, Financial) recently announced a dividend of $0.15 per share, payable on 2023-10-25, with the ex-dividend date set for 2023-10-03. As investors anticipate this upcoming payment, the company's dividend history, yield, and growth rates come under scrutiny. Using the data from GuruFocus, let's delve into Gap Inc's dividend performance and assess its sustainability.
Understanding Gap Inc
Gap Inc retails apparel, accessories, and personal-care products under the Gap, Old Navy, Banana Republic, and Athleta brands. Old Navy contributes to over half of Gap's sales. The firm operates e-commerce sites, outlet stores, and specialty stores under various Gap names. With approximately 2,600 stores in North America, Europe, and Asia, and about 850 franchises in Asia, Europe, Latin America, and other regions, Gap Inc has a broad global presence. Founded in 1969, the company is headquartered in San Francisco.
Gap Inc's Dividend History: A Retrospective
Gap Inc has maintained a consistent dividend payment record since 1985, currently distributing dividends on a quarterly basis. The chart below showcases the annual Dividends Per Share for tracking historical trends.
Gap Inc's Dividend Yield and Growth: A Snapshot
As of today, Gap Inc boasts a 12-month trailing dividend yield and a 12-month forward dividend yield of 5.54%, indicating an expectation of consistent dividend payments over the next 12 months. However, over the past three years, Gap Inc's annual dividend growth rate has been -14.80%. The 5-year yield on cost of Gap Inc stock as of today stands at approximately 5.54%.
Dividend Sustainability: Payout Ratio and Profitability
The sustainability of a dividend hinges on the company's payout ratio. The dividend payout ratio reveals the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, ensuring the availability of funds for future growth and unexpected downturns. As of 2023-07-31, Gap Inc's dividend payout ratio is 2.07, which may suggest that the company's dividend may not be sustainable. Gap Inc's profitability rank is 7 out of 10, suggesting good profitability prospects. The company has reported net profit in 8 years out of the past 10 years.
Growth Metrics: The Future Outlook
For dividends to be sustainable, a company must exhibit robust growth metrics. Gap Inc's growth rank of 7 out of 10 indicates a good growth trajectory relative to its competitors. However, Gap Inc's revenue per share and 3-year revenue growth rate indicate a revenue increase of approximately -0.60% per year on average, a rate that underperforms approximately 62.36% of global competitors.
Conclusion
While Gap Inc has a consistent dividend payment record and a decent profitability rank, the negative dividend growth rate and low revenue growth rate could be areas of concern for investors. The sustainability of its dividends may be questionable given the high payout ratio. Therefore, investors must carefully consider these factors before making investment decisions. GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
