Strategic Education (NASDAQ:STRA) Has Affirmed Its Dividend Of $0.60

The board of Strategic Education, Inc. (NASDAQ:STRA) has announced that it will pay a dividend on the 12th of September, with investors receiving $0.60 per share. Based on this payment, the dividend yield on the company's stock will be 3.4%, which is an attractive boost to shareholder returns.

See our latest analysis for Strategic Education

Strategic Education Is Paying Out More Than It Is Earning

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Strategic Education's profits didn't cover the dividend, but the company was generating enough cash instead. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

If the company can't turn things around, EPS could fall by 10.1% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 168%, which is definitely a bit high to be sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the annual payment back then was $4.00, compared to the most recent full-year payment of $2.40. Doing the maths, this is a decline of about 5.0% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Has Limited Growth Potential

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings per share has been sinking by 10% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think Strategic Education 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. As an example, we've identified 1 warning sign for Strategic Education that you should be aware of before investing. Is Strategic Education 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.