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J&J Snack Foods' (NASDAQ:JJSF) Dividend Will Be Increased To $0.70

·3 min read

J&J Snack Foods Corp.'s (NASDAQ:JJSF) dividend will be increasing from last year's payment of the same period to $0.70 on 11th of October. Although the dividend is now higher, the yield is only 1.9%, which is below the industry average.

See our latest analysis for J&J Snack Foods

J&J Snack Foods' Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before this announcement, J&J Snack Foods was paying out 99% of what it was earning, and not generating any free cash flows either. This high of a dividend payment could start to put pressure on the balance sheet in the future.

Over the next year, EPS is forecast to expand by 46.0%. If the dividend continues along recent trends, we estimate the payout ratio could reach 76%, which is on the higher side, but certainly still feasible.

historic-dividend
historic-dividend

J&J Snack Foods Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2012, the annual payment back then was $0.52, compared to the most recent full-year payment of $2.80. This works out to be a compound annual growth rate (CAGR) of approximately 18% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

Dividend Growth Is Doubtful

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, things aren't all that rosy. It's not great to see that J&J Snack Foods' earnings per share has fallen at approximately 8.8% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

J&J Snack Foods' Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think J&J Snack Foods' payments are rock solid. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for J&J Snack Foods you should be aware of, and 1 of them doesn't sit too well with us. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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