Garmin's Dividend Sustainability and Growth Potential in a High-Yield Environment

If you’re hunting for a dividend stock that balances safety with growth in today’s high-yield environment, Garmin (GRMN) deserves a closer look. The company’s recent financial performance and disciplined payout strategy suggest it’s not just surviving but thriving in a competitive landscape. Let’s break down why this GPS and wearable tech giant could be a compelling addition to your portfolio.

Dividend Safety: A Payout Ratio That Leaves Room to Run

Garmin’s 2025 dividend payout ratio of 44.39% [1] might sound high at first glance, but context is key. Analysts project this will drop to 36% by 2026 as earnings per share (EPS) grow by 17.5% [2]. That’s a textbook example of a company using strong earnings growth to de-risk its dividend. For perspective, Garmin’s payout ratio has historically been as high as 70% in 2020 [3], yet it’s now comfortably below the Technology sector average of 39.2% [4]. This flexibility means Garmin isn’t just paying out—it’s positioning to raise its dividend without overextending.

The numbers don’t lie: Garmin’s EPS for Q2 2025 surged 37% year-over-year to $2.17, crushing estimates by 13–16.67% [5]. This wasn’t a one-off. The company raised its full-year 2025 guidance to $8.00 pro forma EPS [5], driven by robust demand across fitness, aviation, and auto OEM segments. With free cash flow growing at a 9.05% five-year CAGR [6], Garmin has the financial muscle to sustain—and likely expand—its dividend.

Dividend Yield: Modest Now, But With Upside Potential

Garmin’s current yield of 1.33% [7] trails the Technology sector average of 1.59% [7], but this isn’t a red flag. The drop from a five-year average of 2.1% [7] reflects a 31% stock price surge, not a decline in fundamentals. In fact, this lower yield makes the stock more attractive for income-focused investors who want to buy into a company with a proven track record of raising payouts.

Compare Garmin to its peers: Johnson Outdoors (JOUT) offers a 3.24% yield, but its payout ratio of 51.1% [7] is riskier. Honeywell (HON) yields 2.1% but trades at a higher valuation. Garmin’s 38.6% payout ratio [7] strikes a Goldilocks balance—generous enough to reward shareholders, but conservative enough to fund innovation. And with analysts forecasting a 36% payout ratio by 2026 [2], there’s room for the yield to creep higher as earnings grow.

Long-Term Growth: A 6.5% CAGR and Counting

Garmin’s dividend growth story isn’t just about safety—it’s about compounding. The company has boosted its dividend for years, with a 6.5% compound annual growth rate (CAGR) from 2015 to 2024 [1]. That’s faster than the S&P 500’s average 5–6% for high-quality dividend growers.

What’s fueling this? Garmin’s core businesses are in sectors with durable demand. Fitness wearables and outdoor tech are booming, while aviation and marine markets remain resilient. The company’s Q2 results [5] show it’s not just riding a trend—it’s leading one. With a 38.51% payout ratio in the latest quarter [3], Garmin is retaining enough cash to reinvest in R&D and expansion, ensuring its growth engine stays charged.

The Verdict: A Dividend Stock for the Long Haul

Garmin isn’t a high-yield monster like some industrial or utility stocks, but it’s a rare blend of safety, growth, and strategic reinvestment. Its 1.33% yield [7] may not grab headlines, but its 17.5% EPS growth forecast [2] and 6.5% dividend CAGR [1] make it a standout in a market where many “blue chips” are struggling to raise payouts.

For investors who want to balance income with capital appreciation, Garmin checks all the boxes. Yes, the yield is modest today—but with earnings accelerating and a payout ratio that’s both sustainable and scalable, this is a stock where the dividend story is just getting started.

Source:
[1] Garmin’s (NYSE:GRMN) Dividend Will Be $0.90 [https://finance.yahoo.com/news/garmins-nyse-grmn-dividend-0-175449261.html]
[2] Garmin (NYSE:GRMN) Has Announced A Dividend Of $0.90 [https://simplywall.st/stocks/us/consumer-durables/nyse-grmn/garmin/news/garmin-nysegrmn-has-announced-a-dividend-of-090-1]
[3] Garmin Ltd. (GRMN) Dividend Date & History [https://www.koyfin.com/company/grmn/dividends/]
[4] GRMN - Garmin stock dividend history, payout ratio & dates [https://fullratio.com/stocks/nasdaq-grmn/dividend]
[5] Garmin announces second quarter 2025 results [https://www.prnewswire.com/news-releases/garmin-announces-second-quarter-2025-results-302517037.html]
[6] Is Garmin A Quality Growth Stock? A Deep Analysis [https://getmoneyrich.com/is-garmin-a-quality-growth-stock-a-deep-analysis/]
[7] Garmin (NYSE:GRMN) Dividend Yield, History and Growth [https://simplywall.st/stocks/us/consumer-durables/nyse-grmn/garmin/dividend]