The board of John Wiley & Sons, Inc. (NYSE:WLY) has announced that it will pay a dividend of $0.35 per share on the 25th of April. This makes the dividend yield 3.7%, which will augment investor returns quite nicely.
Check out our latest analysis for John Wiley & Sons
John Wiley & Sons' Distributions May Be Difficult To Sustain
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. John Wiley & Sons is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.
Over the next year, EPS is forecast to rise by 53.1%. While it is good to see income moving in the right direction, it still looks like the company won't achieve profitability. The healthy cash flows are definitely a good sign though, so we wouldn't panic just yet, especially with the earnings growing.
John Wiley & Sons Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was $1.00, compared to the most recent full-year payment of $1.40. This implies that the company grew its distributions at a yearly rate of about 3.4% over that duration. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.
The Dividend Has Limited Growth Potential
The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. John Wiley & Sons' earnings per share has shrunk at 32% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.
In Summary
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. We would be a touch cautious of relying on this stock primarily for the dividend income.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 2 warning signs for John Wiley & Sons that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
New: Manage All Your Stock Portfolios in One Place
We've created the ultimate portfolio companion for stock investors, and it's free.
• Connect an unlimited number of Portfolios and see your total in one currency
• Be alerted to new Warning Signs or Risks via email or mobile
• Track the Fair Value of your 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.
About NYSE:WLY
Average dividend payer and slightly overvalued.
