John Wiley & Sons, Inc. (NYSE:JW.A) is about to trade ex-dividend in the next 3 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Thus, you can purchase John Wiley & Sons' shares before the 2nd of July in order to receive the dividend, which the company will pay on the 21st of July.
The company's next dividend payment will be US$0.34 per share, on the back of last year when the company paid a total of US$1.37 to shareholders. Calculating the last year's worth of payments shows that John Wiley & Sons has a trailing yield of 2.3% on the current share price of $58.79. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether John Wiley & Sons has been able to grow its dividends, or if the dividend might be cut.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. John Wiley & Sons paid out more than half (52%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Thankfully its dividend payments took up just 34% of the free cash flow it generated, which is a comfortable payout ratio.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's not encouraging to see that John Wiley & Sons's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, John Wiley & Sons has increased its dividend at approximately 8.0% a year on average.
Is John Wiley & Sons an attractive dividend stock, or better left on the shelf? It's unfortunate that earnings per share have not grown, and we'd note that John Wiley & Sons is paying out lower percentage of its cashflow than its profit, but overall the dividend looks well covered by earnings. All things considered, we are not particularly enthused about John Wiley & Sons from a dividend perspective.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Case in point: We've spotted 2 warning signs for John Wiley & Sons you should be aware of.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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