Stock Analysis

John B. Sanfilippo & Son's (NASDAQ:JBSS) Dividend Will Be Increased To US$3.00

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NasdaqGS:JBSS
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John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS) has announced that it will be increasing its dividend on the 25th of August to US$3.00. This takes the dividend yield from 6.0% to 6.0%, which shareholders will be pleased with.

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

John B. Sanfilippo & Son Doesn't Earn Enough To Cover Its Payments

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, prior to this announcement, John B. Sanfilippo & Son's 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.

Looking forward, earnings per share is forecast to fall by 2.7% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 122%, which could put the dividend under pressure if earnings don't start to improve.

historic-dividend
NasdaqGS:JBSS Historic Dividend August 5th 2021

John B. Sanfilippo & Son's Dividend Has Lacked Consistency

John B. Sanfilippo & Son has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. Since 2013, the dividend has gone from US$1.50 to US$5.50. This works out to be a compound annual growth rate (CAGR) of approximately 18% a year over that time. John B. Sanfilippo & Son has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend 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 12% per 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.

John B. Sanfilippo & Son Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for John B. Sanfilippo & Son that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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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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