Scholastic's (NASDAQ:SCHL) Dividend Will Be $0.20

The board of Scholastic Corporation (NASDAQ:SCHL) has announced that it will pay a dividend on the 15th of September, with investors receiving $0.20 per share. This means the annual payment will be 1.8% of the current stock price, which is lower than the industry average.

See our latest analysis for Scholastic

Scholastic's Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, Scholastic was paying a whopping 103% as a dividend, but this only made up 31% of its overall earnings. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share is forecast to rise by 33.8% over the next year. If the dividend continues on this path, the payout ratio could be 23% by next year, which we think can be pretty sustainable going forward.

Scholastic Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.50 in 2013 to the most recent total annual payment of $0.80. This means that it has been growing its distributions at 4.8% 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 Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Scholastic has seen EPS rising for the last five years, at 40% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Our Thoughts On Scholastic's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. 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. For instance, we've picked out 1 warning sign for Scholastic 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.