Scotts Miracle-Gro's (NYSE:SMG) Dividend Will Be $0.66
The Scotts Miracle-Gro Company (NYSE:SMG) will pay a dividend of $0.66 on the 8th of September. The dividend yield will be 4.7% based on this payment which is still above the industry average.
See our latest analysis for Scotts Miracle-Gro
Scotts Miracle-Gro's Dividend Is Well Covered By Earnings
If the payments aren't sustainable, a high yield for a few years won't matter that much. Even though Scotts Miracle-Gro isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. This gives us some comfort about the level of the dividend payments.
Analysts expect a massive rise in earnings per share in the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 59%, so there isn't too much pressure on the dividend.
Scotts Miracle-Gro Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $1.30 in 2013 to the most recent total annual payment of $2.64. This implies that the company grew its distributions at a yearly rate of about 7.3% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
Dividend Growth Potential Is Shaky
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. Scotts Miracle-Gro's EPS has fallen by approximately 31% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.
Our Thoughts On Scotts Miracle-Gro's Dividend
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We would probably look elsewhere for an income investment.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for Scotts Miracle-Gro (of which 1 shouldn't be ignored!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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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.
