Scholastic (NASDAQ:SCHL) Has Announced A Dividend Of $0.20

The board of Scholastic Corporation (NASDAQ:SCHL) has announced that it will pay a dividend on the 16th of September, with investors receiving $0.20 per share. This means that the annual payment will be 2.7% of the current stock price, which is in line with the average for the industry.

View our latest analysis for Scholastic

Scholastic's Dividend Is Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Before making this announcement, Scholastic's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

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 an extended history of paying stable dividends. Since 2014, the dividend has gone from $0.60 total annually to $0.80. This implies that the company grew its distributions at a yearly rate of about 2.9% over that duration. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Scholastic hasn't seen much change in its earnings per share over the last five years.

Our Thoughts On Scholastic's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. 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. 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 3 warning signs for Scholastic that investors need to be conscious of moving forward. Is Scholastic not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.