John B. Sanfilippo & Son, Inc.'s (NASDAQ:JBSS) Could Be A Buy For Its Upcoming Dividend
John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS) is about to trade ex-dividend in the next 4 days. Investors can purchase shares before the 26th of May in order to be eligible for this dividend, which will be paid on the 17th of June.
John B. Sanfilippo & Son's upcoming dividend is US$1.00 a share, following on from the last 12 months, when the company distributed a total of US$2.60 per share to shareholders. Calculating the last year's worth of payments shows that John B. Sanfilippo & Son has a trailing yield of 3.1% on the current share price of $84.02. If you buy this business for its dividend, you should have an idea of whether John B. Sanfilippo & Son's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
Check out our latest analysis for John B. Sanfilippo & Son
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. John B. Sanfilippo & Son paid out just 12% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Dividends consumed 56% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
It's positive to see that John B. Sanfilippo & Son's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see how much of its profit John B. Sanfilippo & Son paid out over the last 12 months.
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, John B. Sanfilippo & Son's earnings per share have been growing at 15% a year for the past five years. John B. Sanfilippo & Son is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last six years, John B. Sanfilippo & Son has lifted its dividend by approximately 9.6% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
The Bottom Line
Is John B. Sanfilippo & Son worth buying for its dividend? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. It's a promising combination that should mark this company worthy of closer attention.
On that note, you'll want to research what risks John B. Sanfilippo & Son is facing. Our analysis shows 2 warning signs for John B. Sanfilippo & Son that we strongly recommend you have a look at before investing in the company.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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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. Thank you for reading.
