Investing in dividend 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 stock that I view as exceptional and well worth a closer look is Dick's Sporting Goods (DKS -1.01%). The American sporting goods retailer is a superb capital allocator, and has rewarded its shareholders with huge dividend growth.
Here are several reasons why investors looking for income may want to put Dick's at the top of their stock watch lists.
Impressive dividend growth
Alongside its announcement of record-setting 2022 results last week, the company surprised investors with a 105% increase to its dividend. Dick's new quarterly payout is $1 per share, which at the current stock price gives it an attractive dividend yield of 2.8%.
Management is extremely confident about Dick's future. "In 2023, we will grow both our sales and earnings through positive comps," said CEO Lauren Hobart in the company's fourth-quarter earnings release. Its momentum, Hobart added, has positioned Dick's to simultaneously accelerate investments in its business "to fuel long-term growth opportunities, and also return significant capital to shareholders." Further, the dividend increase reflects management's "strong conviction" in the company's "structurally higher sales and earnings," she said.
This robust business momentum sets Dick's up well for more dividend hikes in the years ahead. Making the argument for expecting additional increases even stronger, Dick's boasts an exceptionally low payout ratio. Over the past 12 months, Dick's distributed only 15.6% of its earnings in dividends.
More than meets the eye
Dick's has an impressive dividend history, going back more than a decade.
Here's one tidbit about its that history that highlights just how well this business is doing, despite an uncertain market. In 2020, Dick's said that it was going to suspend dividend payments after many of its stores were shuttered early in the pandemic. But it didn't end up missing a payment after all. Instead, it reinstated the program, citing extremely strong sales after those stores reopened.
Another key aspect to Dick's history of rewarding shareholders -- and a part of it that some investors may overlook -- is that it occasionally pays special dividends on top of its regular dividends. In 2012 and 2021, for instance, Dick's paid shareholders $2 and $5.50 special dividends, respectively. Highlighting how significant the 2021 special dividend was, it amounts to more than five times the boosted quarterly dividend Dick's just announced.
Not only does Dick's Sporting Goods offer a reliable dividend, it has also shown impressive payout growth in recent years. The company also boasts strong cash flows and continues to pursue strategic capital allocation initiatives that should benefit shareholders in the long run.
As always, do your own due diligence and research before making any investment decision. But if you are looking to add a reliable dividend payer to your portfolio, Dick's Sporting Goods is definitely worth considering.