Juniper Networks (NYSE:JNPR) Is Due To Pay A Dividend Of US$0.21

The board of Juniper Networks, Inc. (NYSE:JNPR) has announced that it will pay a dividend on the 22nd of June, with investors receiving US$0.21 per share. This means that the annual payment will be 2.6% of the current stock price, which is in line with the average for the industry.

View our latest analysis for Juniper Networks

Juniper Networks' Earnings Easily Cover the Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, Juniper Networks' dividend made up quite a large proportion of earnings but only 45% of free cash flows. This leaves plenty of cash for reinvestment into the business.

The next year is set to see EPS grow by 40.8%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 63% which would be quite comfortable going to take the dividend forward.

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 first annual payment was US$0.40, compared to the most recent full-year payment of US$0.84. This implies that the company grew its distributions at a yearly rate of about 9.7% over that duration. Investors will likely want to see a longer track record of growth before making decision to add this to their income portfolio.

Dividend Growth May Be Hard To Come By

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. Juniper Networks has seen earnings per share falling at 8.0% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

Our Thoughts On Juniper Networks' 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. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for Juniper Networks that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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