JDE Peet's N.V.'s (AMS:JDEP) investors are due to receive a payment of €0.35 per share on 24th of January. Based on this payment, the dividend yield on the company's stock will be 3.7%, which is an attractive boost to shareholder returns.
See our latest analysis for JDE Peet's
JDE Peet's' Projected Earnings Seem Likely To Cover Future Distributions
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, JDE Peet's' dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.
Looking forward, earnings per share is forecast to rise by 52.8% over the next year. If the dividend continues on this path, the payout ratio could be 42% by next year, which we think can be pretty sustainable going forward.
JDE Peet's Doesn't Have A Long Payment History
The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 4 years, which isn't that long in the grand scheme of things. The most recent annual payment of €0.70 is about the same as the annual payment 4 years ago. JDE Peet's hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.
Dividend Growth Potential Is Shaky
The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. JDE Peet's' earnings per share has shrunk at 11% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.
In Summary
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for JDE Peet's that investors need to be conscious of moving forward. Is JDE Peet's not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
About ENXTAM:JDEP
Undervalued with proven track record.
