Covered, rising, and lightly levered — but the payout was suspended in 2020, inside the review band. Tapestry pays $0.4625 a quarter, $1.85 annualized, raised 15.6% in August 2026 from $0.40, with raises every year since resuming in 2021 at $0.25. Dividends of $321 million are 28% of fiscal 2026 free cash flow of $1,147 million, a pass, and net debt is 1.0x EBITDA, a pass. The caution is history: the dividend was suspended in 2020, inside the 5-to-10-year review band, so the card grades warn until the rebuilt record lengthens.
Key risk: Coach and Kate Spade demand is discretionary and fashion-driven; a brand or consumer downturn cuts the free cash flow that funds both the dividend and the large buyback program.
Changes if: The rebuilt raise record lengthens past the review band, or free-cash-flow payout crosses 60%.
- ✓Cash-flow cover 28.0% of FY2026 free cash flow, pass (<60%).
- ✓Leverage 1.0x net debt/EBITDA, pass (<3x).
- !Dividend history Suspended in 2020, resumed 2021 and raised every year since; cut 5-10 years ago is the review band, a caution.
- ✓Trap screen Yield 1.49%, payout under 100%, no cut in 3 years; not a trap pattern.
What this grade doesn't say: It screens the dividend only — covered, real, compounding. It says nothing about valuation or price: a well-covered payer can still be overpriced, and its price can still fall.