Stock Analysis

Is It Smart To Buy John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS) Before It Goes Ex-Dividend?

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NasdaqGS:JBSS
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John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS) is about to trade ex-dividend in the next 4 days. You can purchase shares before the 25th of February in order to receive the dividend, which the company will pay on the 16th of March.

John B. Sanfilippo & Son's upcoming dividend is US$2.50 a share, following on from the last 12 months, when the company distributed a total of US$6.00 per share to shareholders. Looking at the last 12 months of distributions, John B. Sanfilippo & Son has a trailing yield of approximately 6.7% on its current stock price of $90.08. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for John B. Sanfilippo & Son

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. John B. Sanfilippo & Son has a low and conservative payout ratio of just 13% of its income after tax. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. What's good is that dividends were well covered by free cash flow, with the company paying out 13% of its cash flow last year.

It's positive to see that John B. Sanfilippo & Son's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see how much of its profit John B. Sanfilippo & Son paid out over the last 12 months.

historic-dividend
NasdaqGS:JBSS Historic Dividend February 20th 2021

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, John B. Sanfilippo & Son's earnings per share have been growing at 13% a year for the past five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last seven years, John B. Sanfilippo & Son has lifted its dividend by approximately 22% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

Is John B. Sanfilippo & Son worth buying for its dividend? It's great that John B. Sanfilippo & Son is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. There's a lot to like about John B. Sanfilippo & Son, and we would prioritise taking a closer look at it.

So while John B. Sanfilippo & Son looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Our analysis shows 2 warning signs for John B. Sanfilippo & Son that we strongly recommend you have a look at before investing in the company.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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What are the risks and opportunities for John B. Sanfilippo & Son?

John B. Sanfilippo & Son, Inc., through its subsidiary, JBSS Ventures, LLC, processes and distributes tree nuts and peanuts in the United States.

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Rewards

  • Price-To-Earnings ratio (16.2x) is below the Food industry average (17.9x)

Risks

  • Significant insider selling over the past 3 months

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