Stock Analysis

Johnson Outdoors (NASDAQ:JOUT) Is Paying Out A Larger Dividend Than Last Year

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NasdaqGS:JOUT
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Johnson Outdoors Inc. (NASDAQ:JOUT) has announced that it will be increasing its periodic dividend on the 27th of October to $0.31, which will be 3.3% higher than last year's comparable payment amount of $0.30. Despite this raise, the dividend yield of 2.3% is only a modest boost to shareholder returns.

See our latest analysis for Johnson Outdoors

Johnson Outdoors' Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Based on the last payment, Johnson Outdoors was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, earnings per share is forecast to rise by 30.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 27%, which is in the range that makes us comfortable with the sustainability of the dividend.

historic-dividend
NasdaqGS:JOUT Historic Dividend October 2nd 2022

Johnson Outdoors Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2013, the annual payment back then was $0.30, compared to the most recent full-year payment of $1.20. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

Johnson Outdoors May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, Johnson Outdoors has only grown its earnings per share at 4.7% per annum over the past five years. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Johnson Outdoors 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Johnson Outdoors has 4 warning signs (and 1 which doesn't sit too well with us) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

What are the risks and opportunities for Johnson Outdoors?

Johnson Outdoors Inc. designs, manufactures, and markets seasonal and outdoor recreational products for fishing worldwide.

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Rewards

  • Trading at 51.5% below our estimate of its fair value

  • Earnings are forecast to grow 22.5% per year

Risks

  • High level of non-cash earnings

  • Profit margins (5.9%) are lower than last year (12.3%)

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About NasdaqGS:JOUT

Johnson Outdoors

Johnson Outdoors Inc. designs, manufactures, and markets seasonal and outdoor recreational products for fishing worldwide.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation3
Future Growth3
Past Performance1
Financial Health6
Dividends2

Read more about these checks in the individual report sections or in our analysis model.

Flawless balance sheet and fair value.