Juniper Networks (NYSE:JNPR) Has Announced That It Will Be Increasing Its Dividend To $0.22

Juniper Networks, Inc.'s (NYSE:JNPR) dividend will be increasing from last year's payment of the same period to $0.22 on 22nd of June. Based on this payment, the dividend yield for the company will be 3.0%, which is fairly typical for the industry.

See our latest analysis for Juniper Networks

Juniper Networks' Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Juniper Networks' earnings easily covered the dividend, but free cash flows were negative. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Looking forward, earnings per share is forecast to rise by 30.5% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 47% by next year, which is in a pretty sustainable range.

Juniper Networks Is Still Building Its Track Record

It is great to see that Juniper Networks has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2014, the annual payment back then was $0.40, compared to the most recent full-year payment of $0.88. This implies that the company grew its distributions at a yearly rate of about 9.2% over that duration. Juniper Networks has been growing its dividend at a decent rate, and the payments have been stable. However, the payment history is very short, so there is no evidence yet that the dividend can be sustained over a full economic cycle.

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. Juniper Networks has impressed us by growing EPS at 20% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Juniper Networks could prove to be a strong dividend payer.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Juniper Networks will make a great income stock. While Juniper Networks is earning enough to cover the payments, the cash flows are lacking. We don't think Juniper Networks is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Juniper Networks that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.