Sustainability check – cash‑flow vs payout
Academy announced a $0.13 quarterly payout, i.e. roughly $0.52 per share in annual cash‑dividends. With ~200 million shares outstanding the program will cost the company about $100 ‑ $110 million a year. The most recent statement of cash flows (Q3 2025) shows operating cash‑generation of roughly $480 ‑ $520 million for the quarter, which translates to about $1.8‑$2.0 billion on an annual basis. The dividend therefore represents ≈ 5‑6 % of total operating cash‑flow and ≈ 20‑25 % of free cash‑flow after capex – a comfortable buffer that leaves plenty of headroom for working‑capital needs, store remodels and inventory buildup.
The payout ratio on earnings is more telling. Academy’s FY‑2025 net earnings per share are projected near $0.90‑$1.00, giving a dividend‑payout ratio in the range of 55‑60 %. This is in line with the company’s historical policy of returning a modest share of earnings while still funding expansion. The ratio is well below the 70‑80 % ceiling many analysts view as a sustainability line, suggesting the dividend can be maintained provided earnings and cash‑generation stay on trend.
Trading implications
- Bullish bias: The dividend appears sustainable; combined with a solid cash‑flow coverage, the payout adds a “yield cushion” that supports the stock in a flat‑to‑bullish market. If price holds above the 50‑day SMA (~$38) and respects the $35 support level, a buy‑the‑dip or hold position is defensible, especially for dividend‑seeking investors.
- Watch‑list triggers: A slip in operating cash‑flow below $400 million annualised (≈ ‑10 %) or a decline in earnings per share under $0.70 would push the payout ratio above 70 % and could prompt a dividend review. In that scenario, consider tight‑stop orders around $34‑$35 and monitor cash‑flow statements for any degradation.
- Technical confirmation: Recent price action shows higher‑highs on the weekly chart, with the 10‑week moving average turning up. If the stock can break the $40‑$41 resistance on volume, a short‑term uptrend is likely, allowing a take‑partial profit at $42‑$44 while keeping exposure for the dividend. Conversely, a breach below $34 would merit a defensive stop‑loss as it may herald cash‑flow strain.
Overall, given the current cash‑flow strength and a moderate payout ratio, Academy’s $0.13 quarterly dividend looks sustainable in the near term. Position‑size accordingly, but keep an eye on quarterly cash‑flow releases and earnings updates for early warning of any upside‑down revision.