Papa John's International (NASDAQ:PZZA) Is Increasing Its Dividend To $0.46

The board of Papa John's International, Inc. (NASDAQ:PZZA) has announced that the dividend on 25th of August will be increased to $0.46, which will be 9.5% higher than last year's payment of $0.42 which covered the same period. This makes the dividend yield about the same as the industry average at 2.1%.

See our latest analysis for Papa John's International

Papa John's International's Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before this announcement, Papa John's International was paying out 80% of earnings, but a comparatively small 66% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

The next year is set to see EPS grow by 94.7%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 45% which brings it into quite a comfortable range.

Papa John's International Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.50 in 2013 to the most recent total annual payment of $1.68. This means that it has been growing its distributions at 13% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Dividend Growth May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. Papa John's International hasn't seen much change in its earnings per share over the last five years.

Our Thoughts On Papa John's International's Dividend

Overall, we always like to see the dividend being raised, but we don't think Papa John's International will make a great income stock. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We don't think Papa John's International is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Papa John's International that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield 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.