Strategic Education (NASDAQ:STRA) Is Due To Pay A Dividend Of $0.60

The board of Strategic Education, Inc. (NASDAQ:STRA) has announced that it will pay a dividend on the 11th of September, with investors receiving $0.60 per share. This makes the dividend yield 3.2%, which will augment investor returns quite nicely.

View our latest analysis for Strategic Education

Strategic Education Is Paying Out More Than It Is Earning

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, the company was paying out 154% of what it was earning. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Over the next year, EPS is forecast to expand by 53.5%. If the dividend continues on its recent course, the payout ratio in 12 months could be 103%, which is a bit high and could start applying pressure to the balance sheet.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of $4.00 in 2013 to the most recent total annual payment of $2.40. Doing the maths, this is a decline of about 5.0% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Earnings has been rising at 2.5% per annum over the last five years, which admittedly is a bit slow. So the company has struggled to grow its EPS yet it's still paying out 154% of its earnings. This gives limited room for the company to raise the dividend in the future.

Strategic Education's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The payments are bit high to be considered sustainable, and the track record isn't the best. 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. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Strategic Education 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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