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Juniper Networks, Inc. (NYSE:JNPR) Stock Goes Ex-Dividend In Just Three Days

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It looks like Juniper Networks, Inc. (NYSE:JNPR) is about to go ex-dividend in the next three 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase Juniper Networks' shares on or after the 31st of May will not receive the dividend, which will be paid on the 22nd of June.

The company's upcoming dividend is US$0.21 a share, following on from the last 12 months, when the company distributed a total of US$0.84 per share to shareholders. Based on the last year's worth of payments, Juniper Networks stock has a trailing yield of around 2.7% on the current share price of $30.62. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Juniper Networks has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Juniper Networks

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. It paid out 77% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. It could become a concern if earnings started to decline. 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 44% 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.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Juniper Networks's earnings per share have fallen at approximately 7.5% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Juniper Networks has delivered an average of 9.7% per year annual increase in its dividend, based on the past eight years of dividend payments. The only way to pay higher dividends when earnings are shrinking is either to pay out a larger percentage of profits, spend cash from the balance sheet, or borrow the money. Juniper Networks is already paying out 77% of its profits, and with shrinking earnings we think it's unlikely that this dividend will grow quickly in the future.

Final Takeaway

Should investors buy Juniper Networks for the upcoming dividend? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. To summarise, Juniper Networks looks okay on this analysis, although it doesn't appear a stand-out opportunity.

If you want to look further into Juniper Networks, it's worth knowing the risks this business faces. For example - Juniper Networks has 2 warning signs we think you should be aware of.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.