Escalade (NASDAQ:ESCA) Has Affirmed Its Dividend Of US$0.15

Escalade, Incorporated (NASDAQ:ESCA) will pay a dividend of US$0.15 on the 7th of June. This means the annual payment is 4.4% of the current stock price, which is above the average for the industry.

View our latest analysis for Escalade

Escalade's Earnings Easily Cover the Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Escalade was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, earnings per share is forecast to fall by 0.6% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 32%, which is comfortable for the company to continue in the future.

Escalade Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2012, the first annual payment was US$0.25, compared to the most recent full-year payment of US$0.60. This means that it has been growing its distributions at 9.1% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Escalade has impressed us by growing EPS at 19% per year over the past five years. Escalade definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

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. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Escalade is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for Escalade (1 doesn't sit too well with us!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.