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This is your daily dividend safety check. Let's look at Steelcase (NYSE:SCS) to see if its 3.38% dividend yield is safe, judging by its earnings to dividend payout ratio and history of dividend cuts.
Steelcase's Payout Ratio
A dividend's affordability can be measured by its payout ratio. It's equal to dividends per share divided by earnings per share. Steelcase's payout ratio of 18.18% is low enough to not cause concern. When a payout ratio is relatively low (i.e. below 75%), it suggests that a company can afford to cover its dividend. A ratio closer to 100% could indicate a company is struggling to cover its dividend.
Has Steelcase Cut Its Dividend in the Recent Past?
In general, past behavior does not predict future behavior, but companies that have a recent history of dividend cuts are more likely to cut them again, as they have less of an incentive to appease income investors than companies with long histories of consistent or rising dividends. Steelcase has not cut its dividend in the last few years. While this is no guarantee of dividend safety, it does imply that the company's management is reluctant to cut it.
How Safe Is Steelcase's Dividend Overall?
Steelcase has failed neither of our dividend safety tests. It has a low payout ratio and no recent case of dividend cut. With all of this in mind, it is quite unlikely that Steelcase will cut its dividend next quarter.
Looking for more help identifying reliable investments? Check out Benzinga's Breakout Opportunity Letter.
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