Jack Henry & Associates' (NASDAQ:JKHY) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Jack Henry & Associates, Inc. (NASDAQ:JKHY) has announced that it will be increasing its dividend by 5.5% on the 25th of March to $0.58, up from last year's comparable payment of $0.55. This makes the dividend yield 1.3%, which is above the industry average.

See our latest analysis for Jack Henry & Associates

Jack Henry & Associates' Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, Jack Henry & Associates' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 32.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 33% by next year, which is in a pretty sustainable range.

Jack Henry & Associates Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the annual payment back then was $0.88, compared to the most recent full-year payment of $2.20. This implies that the company grew its distributions at a yearly rate of about 9.6% over that duration. 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 Has Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Jack Henry & Associates has been growing its earnings per share at 8.7% a year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like Jack Henry & Associates' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Jack Henry & Associates that you should be aware of before investing. 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.