Caleres (CAL): A Dividend Machine With Room to Grow

In an era where dividend cuts are becoming alarmingly common, Caleres (NYSE:CAL) stands out as a rare gem. This century-old footwear powerhouse has maintained a consistent quarterly dividend of $0.07 per share since at least 2020, delivering a total annual payout of $0.28. With a dividend yield of 1.73% and a payout ratio of just 9.12%, CAL’s dividend isn’t just sustainable—it’s primed for growth.

The Math of Dividend Sustainability

Let’s start with the numbers. Caleres’ Q1 2025 earnings per share (EPS) were $0.33, while the quarterly dividend remained at $0.07. This results in a payout ratio of 21.21% when calculated quarterly—but the company’s full-year guidance paints an even stronger picture. Using the fiscal 2025 EPS guidance midpoint of $3.00, the annualized dividend payout ratio drops to 9.33%. This is among the lowest payout ratios in the footwear industry, signaling that CAL could comfortably increase its dividend without straining its finances.

Moreover, CAL’s cash payout ratio—a measure of dividends relative to cash flow—is 18.1%, further underscoring its financial flexibility. With $2.723 billion in annual revenue and a history of consistent free cash flow, Caleres has the resources to not only sustain its dividend but also reinvest in growth initiatives.

Why the Dividend Hasn’t Grown—Yet

While CAL’s dividend has remained steady for years, this is not a sign of stagnation. Instead, it reflects management’s cautious approach to capital allocation. Over the past decade, CAL has prioritized strategic moves like the acquisition of Stuart Weitzman in 2019—a luxury brand that now contributes significantly to its premium segment. This focus on strengthening its portfolio over rapid dividend hikes has kept the payout ratio low, preserving room for future growth.

The Case for Dividend Growth

The question isn’t whether CAL can grow its dividend, but when. With a payout ratio under 10%, even modest earnings growth could trigger an increase. Consider this: if CAL’s EPS rises to $3.20 (the high end of its 2025 guidance), the dividend could be raised to $0.30 annually ($0.075 per quarter) without pushing the payout ratio above 9.4%. That’s a 7.1% increase from current levels—and a strong signal for income investors.

Furthermore, CAL’s diversified brand portfolio—spanning athletic wear (Nike, Skechers), luxury (Stuart Weitzman), and everyday essentials (Naturalizer)—positions it to thrive in varying economic conditions. This resilience reduces the risk of dividend cuts, even during downturns.

A Compelling Entry Point

CAL’s stock price has fluctuated in 2025, but its dividend remains a rock of stability. At a market cap of $545 million, CAL is undervalued relative to its peers. The stock’s price-to-earnings (P/E) ratio of 15.5 is well below the industry average, suggesting it’s a bargain for income-focused investors.

Why Act Now?

The writing is on the wall: CAL’s dividend is safe, and growth is inevitable. With a payout ratio this low, management has little reason to hold back increases once earnings stabilize or rise. For investors seeking a dividend stock with both safety and upside potential, CAL offers a rare combination of traits:

• Consistency: 100+ consecutive quarters of dividend payments.
• Flexibility: Minimal payout ratio leaves room for hikes.
• Diversification: Brands spanning luxury to everyday footwear.
• Valuation: Undervalued relative to peers.

Conclusion

Caleres isn’t just a dividend survivor—it’s a dividend growth candidate in the making. With a payout ratio so low and a history of prudent capital allocation, CAL’s next move is almost inevitable. For income investors tired of chasing high-yield traps, CAL offers a stable base with the potential to deliver dividend growth in the coming years. This is a stock to buy and hold, with a dividend check that’s as reliable as a century-old tradition.