John Wiley & Sons' (NYSE:WLY) Dividend Will Be Increased To $0.35

The board of John Wiley & Sons, Inc. (NYSE:WLY) has announced that the dividend on 20th of July will be increased to $0.35, which will be 0.7% higher than last year's payment of $0.348 which covered the same period. This makes the dividend yield 4.1%, which is above the industry average.

View our latest analysis for John Wiley & Sons

John Wiley & Sons' Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, the company was paying out 448% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 45%. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

Looking forward, earnings per share is forecast to rise exponentially over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 57%, which would make us comfortable with the dividend's sustainability, despite the levels currently being elevated.

John Wiley & Sons Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2013, the annual payment back then was $0.96, compared to the most recent full-year payment of $1.39. This implies that the company grew its distributions at a yearly rate of about 3.8% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. Over the past five years, it looks as though John Wiley & Sons' EPS has declined at around 38% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. 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 don't think John Wiley & Sons is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 4 warning signs for John Wiley & Sons that investors should take into consideration. Is John Wiley & Sons 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.