Williams-Sonoma Offers Shareholders 11.6% Quarterly Dividend Hike (WSM)
By: Ned Piplovic,
Continuing its current streak of rising annual dividend payouts for more than a decade, Williams-Sonoma, Inc. (NYSE:WSM) boosted its annual dividend distribution with an 11.6% quarterly dividend hike for its upcoming round of payouts.
The company initiated dividend distributions in 2006 and has rewarded its shareholders with at least one quarterly dividend hike over the past 13 consecutive years. In addition to boosting its annual dividend amount every year, Williams-Sonoma managed to maintain a double-digit percentage annual dividend growth rate for more than a decade.
Williams-Sonoma’s current dividend payout ratio of 42% is lower than the company’s own five year average yield of 44%. Furthermore, the current payout ratio is within the 30% to 50% sustainable range. The 42% dividend payout ratio indicates that the company currently uses just slightly more than 40% of its earnings for dividend distributions, which leaves more than enough funds for financing business operations and expansion. While not a certainty, a dividend payout ratio in the sustainable range implies a high probability that – barring any unforeseen circumstances or a “black swan” event – the company should be able to maintain its quarterly dividend hike pace, at least in the near term.
Interested investors should perform their own due diligence prior to taking a position in this stock. However, investors who decide to proceed and take a long position should do so prior to the company’s next April 25, 2019, ex-dividend date to guarantee eligibility for the company’s next round of dividend distributions on the May 31, 2019, pay date.
Williams-Sonoma, Inc. (NYSE:WSM)
Headquartered in San Francisco and founded in 1956, Williams-Sonoma, Inc. operates as a multi-channel specialty retailer of various products for home. The company offers cooking tools, dining implements, entertaining products and a library of cookbooks under the Williams-Sonoma brand, as well as home furnishings and decorative accessories under the Williams-Sonoma Home brand. Additionally, the company sells furniture, bedding, rugs, curtains, lighting and tabletop and decorative accessories under the Pottery Barn, Pottery Barn Kids, PBteen and West Elm brands. Furthermore, the company offers an assortment of lighting, hardware, furniture, and home décor inspired by history under the Rejuvenation brand. Lastly, the company’s Mark and Graham brand offers small leather goods, jewelry, key item apparel, entertaining and bar, home décor and seasonal items. As of February 2019, the company operated 625 of its own stores — 579 stores in the United States and Puerto Rico, 24 stores in Canada, 19 stores in Australia and 3 stores in the United Kingdom. Williams-Sonoma also offered its products through 108 franchised stores and e-commerce sites in the Middle East, the Philippines, Mexico and South Korea.
The company’s most recent quarterly dividend hike increased the payout amount 11.6% from $0.43 in the previous period to the $0.48 current distribution. This new quarterly payout amount is equivalent to a $1.92 annualized dividend amount for 2019 and currently yields 3.33%. Williams-Sonoma’s current forward dividend yield is nearly 30% higher than the company’s own 2.6% average dividend yield over the past five years.
Moreover, Williams-Sonoma’s current dividend outperformed most of its peers, as well as industry averages. The company’s current 3.33% yield is 74% above the 1.91% average yield of the overall Services sector, as well as 182% higher than the 1.18% simple average yield of all the companies in the Specialty Retail industry segment.
In addition to a streak of 13 consecutive years where Williams-Sonoma rewarded its shareholders with at least one quarterly dividend hike, the company’s dividend amount boost was also substantial. Since introducing dividend distributions in 2006, the company has enhanced its total annual payout amount nearly five-fold. That pace of advancement corresponds to an average growth rate of nearly 13% per year.
Williams-Sonoma’s share price declined more than 40% in 2015, which held total returns to a minimum. While the share price is still nearly 10% below its level from five years earlier, dividend income distributions managed to offset those share price losses and delivered a positive total return of 2.8% over the past five years. The three-year total return is even lower at 1.4%. However, the share price has been recovering since late 2017 and has accelerated its recovery since the beginning of 2019. The share price advanced more than 17% over the past year and combined with the rising dividend distributions for a total return of 22% over the past 12 months.
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