Advertisement
U.S. markets close in 1 hour 16 minutes
  • S&P 500

    5,250.19
    +1.70 (+0.03%)
     
  • Dow 30

    39,757.78
    -2.30 (-0.01%)
     
  • Nasdaq

    16,369.11
    -30.41 (-0.19%)
     
  • Russell 2000

    2,123.04
    +8.70 (+0.41%)
     
  • Crude Oil

    83.11
    +1.76 (+2.16%)
     
  • Gold

    2,239.80
    +27.10 (+1.22%)
     
  • Silver

    24.93
    +0.18 (+0.74%)
     
  • EUR/USD

    1.0794
    -0.0035 (-0.32%)
     
  • 10-Yr Bond

    4.2040
    +0.0080 (+0.19%)
     
  • GBP/USD

    1.2620
    -0.0018 (-0.14%)
     
  • USD/JPY

    151.3860
    +0.1400 (+0.09%)
     
  • Bitcoin USD

    70,780.89
    +2,122.24 (+3.09%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • FTSE 100

    7,952.62
    +20.64 (+0.26%)
     
  • Nikkei 225

    40,168.07
    -594.66 (-1.46%)
     

Scotts Miracle-Gro (NYSE:SMG) Will Pay A Dividend Of $0.66

The board of The Scotts Miracle-Gro Company (NYSE:SMG) has announced that it will pay a dividend on the 9th of June, with investors receiving $0.66 per share. This means the annual payment is 3.7% of the current stock price, which is above the average for the industry.

View our latest analysis for Scotts Miracle-Gro

Scotts Miracle-Gro's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The company is paying out a large amount of its cash flows, even though it isn't generating any profit. These payout levels would generally be quite difficult to keep up.

The next year is set to see EPS grow by 193.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 27%, which is in the range that makes us comfortable with the sustainability of the dividend.

historic-dividend
historic-dividend

Scotts Miracle-Gro Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $1.30 in 2013, and the most recent fiscal year payment was $2.64. This means that it has been growing its distributions at 7.3% per annum over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

The Dividend Has Limited Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. Over the past five years, it looks as though Scotts Miracle-Gro's EPS has declined at around 26% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

Scotts Miracle-Gro's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. 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 be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 3 warning signs for Scotts Miracle-Gro (of which 2 are potentially serious!) you should know about. Is Scotts Miracle-Gro not quite the opportunity you were looking for? Why not check out 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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here

Advertisement