John B. Sanfilippo & Son (NASDAQ:JBSS) Is Increasing Its Dividend To $2.10

John B. Sanfilippo & Son, Inc.'s (NASDAQ:JBSS) dividend will be increasing from last year's payment of the same period to $2.10 on 11th of September. The payment will take the dividend yield to 3.1%, which is in line with the average for the industry.

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

John B. Sanfilippo & Son's Earnings Easily Cover The Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, prior to this announcement, John B. Sanfilippo & Son's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS could expand by 13.6% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 52%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was $1.50 in 2014, and the most recent fiscal year payment was $3.10. This works out to be a compound annual growth rate (CAGR) of approximately 7.5% a year over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Dividend Looks Likely To Grow

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. John B. Sanfilippo & Son has impressed us by growing EPS at 14% per year over the past five years. John B. Sanfilippo & Son definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like John B. Sanfilippo & Son's Dividend

Overall, a dividend increase is always good, and we think that John B. Sanfilippo & Son is a strong income stock thanks to its track record and growing earnings. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for John B. Sanfilippo & Son 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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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.