Juniper Networks, Inc. (NYSE:JNPR) has announced that it will pay a dividend of US$0.21 per share on the 22nd of June. Based on this payment, the dividend yield will be 2.7%, which is fairly typical for the industry.
Juniper Networks' Dividend Is Well Covered By Earnings
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Before this announcement, Juniper Networks was paying out 77% of earnings, but a comparatively small 45% of free cash flows. This leaves plenty of cash for reinvestment into the business.
Looking forward, earnings per share is forecast to rise by 40.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 63%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.
Juniper Networks Doesn't Have A Long Payment History
Juniper Networks' dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2014, the dividend has gone from US$0.40 to US$0.84. This implies that the company grew its distributions at a yearly rate of about 9.7% 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.
Dividend Growth May Be Hard To Come By
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. Over the past five years, it looks as though Juniper Networks' EPS has declined at around 8.1% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for Juniper Networks that you should be aware of before investing. Is Juniper Networks not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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.