Readers hoping to buy John Wiley & Sons, Inc. (NYSE:JW.A) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Ex-dividend means that investors that purchase the stock on or after the 30th of March will not receive this dividend, which will be paid on the 15th of April.
John Wiley & Sons's next dividend payment will be US$0.34 per share. Last year, in total, the company distributed US$1.36 to shareholders. Based on the last year's worth of payments, John Wiley & Sons has a trailing yield of 3.8% on the current stock price of $35.94. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. John Wiley & Sons paid out more than half (52%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Thankfully its dividend payments took up just 46% of the free cash flow it generated, which is a comfortable payout ratio.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That explains why we're not overly excited about John Wiley & Sons's flat earnings over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, ten years ago, John Wiley & Sons has lifted its dividend by approximately 9.3% a year on average.
Is John Wiley & Sons an attractive dividend stock, or better left on the shelf? We're not enthused by the flat earnings per share, although at least the company's payout ratio is within reasonable bounds. Additionally, it paid out a lower percentage of its free cash flow, so at least it generated more cash than it spent on dividends. To summarise, John Wiley & Sons looks okay on this analysis, although it doesn't appear a stand-out opportunity.
If you're not too concerned about John Wiley & Sons's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. Our analysis shows 2 warning signs for John Wiley & Sons and you should be aware of these before buying any shares.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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