Jack Henry & Associates (NASDAQ:JKHY) Could Be A Buy For Its Upcoming Dividend
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Jack Henry & Associates, Inc. (NASDAQ:JKHY) is about to go ex-dividend in just 4 days. Ex-dividend means that investors that purchase the stock on or after the 8th of September will not receive this dividend, which will be paid on the 28th of September.
Jack Henry & Associates's upcoming dividend is US$0.43 a share, following on from the last 12 months, when the company distributed a total of US$1.72 per share to shareholders. Last year's total dividend payments show that Jack Henry & Associates has a trailing yield of 1.0% on the current share price of $171.1. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Jack Henry & Associates has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for Jack Henry & Associates
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately Jack Henry & Associates's payout ratio is modest, at just 43% of profit. 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. Fortunately, it paid out only 38% of its free cash flow in the past year.
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.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Jack Henry & Associates, with earnings per share up 8.3% on average over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.
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, 10 years ago, Jack Henry & Associates has lifted its dividend by approximately 18% a year on average. 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
Has Jack Henry & Associates got what it takes to maintain its dividend payments? Earnings per share growth has been growing somewhat, and Jack Henry & Associates is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but Jack Henry & Associates is being conservative with its dividend payouts and could still perform reasonably over the long run. Overall we think this is an attractive combination and worthy of further research.
Curious what other investors think of Jack Henry & Associates? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
If you're in the market for dividend stocks, we recommend checking our list of top 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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