Scholastic (NASDAQ:SCHL) Will Pay A Dividend Of $0.20

The board of Scholastic Corporation (NASDAQ:SCHL) has announced that it will pay a dividend on the 17th of June, with investors receiving $0.20 per share. This payment means the dividend yield will be 2.2%, which is below the average for the industry.

View our latest analysis for Scholastic

Scholastic's Payment Has Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. The last dividend was quite easily covered by Scholastic's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

The next year is set to see EPS grow by 51.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 29% by next year, which is in a pretty sustainable range.

Scholastic Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was $0.50 in 2014, and the most recent fiscal year payment was $0.80. This implies that the company grew its distributions at a yearly rate of about 4.8% over that duration. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

We Could See Scholastic's Dividend Growing

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Scholastic has grown earnings per share at 5.9% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

We Really Like Scholastic's Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. See if management have their own wealth at stake, by checking insider shareholdings in Scholastic stock. Is Scholastic not quite the opportunity you were looking for? Why not check out our selection of top 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.