Should You Buy Just Life Group Limited (NZSE:JLG) For Its Upcoming Dividend?

Just Life Group Limited (NZSE:JLG) stock is about to trade ex-dividend in four days. You will need to purchase shares before the 11th of March to receive the dividend, which will be paid on the 19th of March.

Just Life Group's upcoming dividend is NZ$0.01 a share, following on from the last 12 months, when the company distributed a total of NZ$0.024 per share to shareholders. Calculating the last year's worth of payments shows that Just Life Group has a trailing yield of 2.6% on the current share price of NZ$0.94. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Just Life Group has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Just Life Group

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Just Life Group paid out 62% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Luckily it paid out just 19% of its free cash flow last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Just Life Group paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Just Life Group has grown its earnings rapidly, up 34% a year for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. Earnings per share have been growing quickly and in combination with some reinvestment and a middling payout ratio, the stock may have decent dividend prospects going forwards.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, four years ago, Just Life Group has lifted its dividend by approximately 4.7% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

The Bottom Line

Has Just Life Group got what it takes to maintain its dividend payments? We like Just Life Group's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. Overall we think this is an attractive combination and worthy of further research.

In light of that, while Just Life Group has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 2 warning signs for Just Life Group that you should be aware of before investing in their shares.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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