Jamieson Wellness Inc. (TSE:JWEL) is about to trade ex-dividend in the next four days. This means that investors who purchase shares on or after the 27th of August will not receive the dividend, which will be paid on the 15th of September.
Jamieson Wellness's next dividend payment will be CA$0.13 per share, on the back of last year when the company paid a total of CA$0.44 to shareholders. Looking at the last 12 months of distributions, Jamieson Wellness has a trailing yield of approximately 1.1% on its current stock price of CA$39.85. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately Jamieson Wellness's payout ratio is modest, at just 25% 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. Dividends consumed 67% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
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.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Jamieson Wellness has grown its earnings rapidly, up 162% a year for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Jamieson Wellness has delivered an average of 11% per year annual increase in its dividend, based on the past three years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
To Sum It Up
Should investors buy Jamieson Wellness for the upcoming dividend? Earnings per share have grown at a nice rate in recent times and over the last year, Jamieson Wellness paid out less than half its earnings and a bit over half its free cash flow. Overall we think this is an attractive combination and worthy of further research.
While it's tempting to invest in Jamieson Wellness for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 2 warning signs for Jamieson Wellness you should know about.
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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