Stock Analysis

Jefferies Financial Group (NYSE:JEF) Has Affirmed Its Dividend Of $0.30

NYSE:JEF
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Jefferies Financial Group Inc. (NYSE:JEF) has announced that it will pay a dividend of $0.30 per share on the 25th of August. This makes the dividend yield 3.3%, which will augment investor returns quite nicely.

Check out our latest analysis for Jefferies Financial Group

Jefferies Financial Group's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last dividend, Jefferies Financial Group is earning enough to cover the payment, but then it makes up 130% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share is forecast to rise by 129.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 70%, which is in the range that makes us comfortable with the sustainability of the dividend.

historic-dividend
NYSE:JEF Historic Dividend July 22nd 2023

Jefferies Financial Group Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2013, the annual payment back then was $0.25, compared to the most recent full-year payment of $1.20. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Jefferies Financial Group has grown earnings per share at 25% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Jefferies Financial Group could prove to be a strong dividend payer.

Our Thoughts On Jefferies Financial Group's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Jefferies Financial Group's payments, as there could be some issues with sustaining them into the future. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 3 warning signs for Jefferies Financial Group that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.