This dividend stock just raised its dividend by 10%

Dick’s Sporting Goods (NYSE:DKS) raised its dividend by 10% this quarter, marking the 11th consecutive year that the company has boosted its annual dividend.

The sporting goods retailer declared $1.21 per share dividend, payable to shareholders on April 11. It is up from a dividend of $1.10 per share last quarter.

Over four quarters, the dividend payout per share is $4.85, up from $4.40 per share last year. The company has increased its annual payout every year since 2015.

Dick’s pays out the dividend at a robust yield of 2.25%, which is higher than the average yield among S&P 500 stocks. The yield is the percentage of the share price that goes to the dividend.

Dick’s also has a dividend payout ratio of 31.3%, which means about 31% of its earnings go toward the dividend. Typically, a dividend ratio below 50% is considered good, with 25% to 35% representing the sweet spot. A ratio above 50% or 60% might suggest that the company is putting too much of its earnings toward the dividend, at the expense of other investments in its growth.

A payout ratio that’s too low is just the opposite – it means that the company may not be investing enough in its dividend.

Dick’s also launched a new five-year, up to $3 billion, share repurchase program. That’s after the completion of the five-year $2 billion share repurchase program authorized in 2021.Share repurchase programs help increase the stock’s earnings per share, because it reduces the number of outstanding shares on the market.

Dividend stocks more sought after now

Dividend stocks become more popular in down markets for a few reasons. One, the additional income comes in handy for retirees or those who need additional monthly income.

But more importantly, the dividend income, when invested back into the stock, helps boost the total return. And at times when the stocks markets are tanking and returns are hard to come by, dividend paying stocks can provide a significant boost to the portfolio.

Consider this, in the 1970s, when stock markets were down, reinvested income accounted for 73% of the total return of the S&P 500, according to an analysis by Hartford Funds.

By comparison, in the 1990s and 2010s bull markets, dividends accounted for just 16% and 17% of the S&P 500’s total return. Obviously, when markets are soaring dividends mean less, but in bear markets they mean more.

The S&P 500 is down about 6% YTD, and we don’t know where it goes from here, but if continues to generate low or negative growth, dividend stocks will become more valuable to investors.

Dick’s Sporting Goods stock is down about 18% YTD and is up about 3% over the past 12 months., But to show the impact of the reinvested dividend, the total return over the past 12 months, including the dividend, is about 9.3%.

Over the past 10 years, the average annualized return is 12.6%. With the dividend reinvested, the average annualized total return over the past 10 years is 16%.