Bath & Body Works, Inc.'s (NYSE:BBWI) investors are due to receive a payment of $0.20 per share on 5th of September. This makes the dividend yield 2.7%, which will augment investor returns quite nicely.

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Bath & Body Works' Future Dividend Projections Appear Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, Bath & Body Works' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 14.1% over the next year. If the dividend continues on this path, the payout ratio could be 16% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for Bath & Body Works

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the dividend has gone from $1.36 total annually to $0.80. This works out to be a decline of approximately 5.2% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. It's encouraging to see that Bath & Body Works has been growing its earnings per share at 20% a year over the past five years. Bath & Body Works definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Bath & Body Works Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Bath & Body Works might even raise payments in the future. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 3 warning signs for Bath & Body Works (of which 1 is concerning!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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