Don't Race Out To Buy John Wiley & Sons, Inc. (NYSE:WLY) Just Because It's Going Ex-Dividend
John Wiley & Sons, Inc. (NYSE:WLY) is about to trade ex-dividend in the next 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase John Wiley & Sons' shares on or after the 26th of December, you won't be eligible to receive the dividend, when it is paid on the 11th of January.
The company's next dividend payment will be US$0.35 per share, and in the last 12 months, the company paid a total of US$1.40 per share. Calculating the last year's worth of payments shows that John Wiley & Sons has a trailing yield of 4.2% on the current share price of $33.25. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether John Wiley & Sons can afford its dividend, and if the dividend could grow.
Check out our latest analysis for John Wiley & Sons
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. John Wiley & Sons's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If John Wiley & Sons didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. It distributed 48% of its free cash flow as dividends, a comfortable payout level for most companies.
Click here to see how much of its profit John Wiley & Sons paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. John Wiley & Sons was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, John Wiley & Sons has increased its dividend at approximately 3.8% a year on average.
Get our latest analysis on John Wiley & Sons's balance sheet health here.
To Sum It Up
Is John Wiley & Sons worth buying for its dividend? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.
Although, if you're still interested in John Wiley & Sons and want to know more, you'll find it very useful to know what risks this stock faces. For example, we've found 2 warning signs for John Wiley & Sons that we recommend you consider before investing in the business.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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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.
