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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Jefferies Financial Group Inc. (NYSE:JEF) is about to trade ex-dividend in the next 4 days. Ex-dividend means that investors that purchase the stock on or after the 14th of August will not receive this dividend, which will be paid on the 28th of August.
Jefferies Financial Group's next dividend payment will be US$0.15 per share. Last year, in total, the company distributed US$0.60 to shareholders. Looking at the last 12 months of distributions, Jefferies Financial Group has a trailing yield of approximately 3.6% on its current stock price of $16.85. If you buy this business for its dividend, you should have an idea of whether Jefferies Financial Group's dividend is reliable and sustainable. As a result, readers should always check whether Jefferies Financial Group has been able to grow its dividends, or if the dividend might be cut.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Jefferies Financial Group paid out a comfortable 42% of its profit last year.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Jefferies Financial Group's earnings per share have been growing at 18% a year for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Jefferies Financial Group has delivered an average of 9.1% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
Is Jefferies Financial Group an attractive dividend stock, or better left on the shelf? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Jefferies Financial Group ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
While it's tempting to invest in Jefferies Financial Group for the dividends alone, you should always be mindful of the risks involved. We've identified 3 warning signs with Jefferies Financial Group (at least 1 which is potentially serious), and understanding them should be part of your investment process.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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. 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.
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