Scholastic (NASDAQ:SCHL) Has Affirmed Its Dividend Of $0.20

Scholastic Corporation (NASDAQ:SCHL) has announced that it will pay a dividend of $0.20 per share on the 16th of September. This means the dividend yield will be fairly typical at 2.7%.

See our latest analysis for Scholastic

Scholastic's Dividend Is Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. Based on the last payment, Scholastic's profits didn't cover the dividend, but the company was generating enough cash instead. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

According to analysts, EPS should be several times higher next year. Assuming the dividend continues along recent trends, we estimate that the payout ratio could reach 32%, which is in a comfortable range for us.

Scholastic Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of $0.60 in 2014 to the most recent total annual payment of $0.80. This means that it has been growing its distributions at 2.9% per annum over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

The Dividend's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. Unfortunately, Scholastic's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We don't think Scholastic is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 3 warning signs for Scholastic that you should be aware of before investing. 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.

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