Is It Smart To Buy The St. Joe Company (NYSE:JOE) Before It Goes Ex-Dividend?
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see The St. Joe Company (NYSE:JOE) is about to trade ex-dividend in the next three days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a 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. Accordingly, St. Joe investors that purchase the stock on or after the 4th of March will not receive the dividend, which will be paid on the 29th of March.
The company's upcoming dividend is US$0.10 a share, following on from the last 12 months, when the company distributed a total of US$0.40 per share to shareholders. Based on the last year's worth of payments, St. Joe has a trailing yield of 0.7% on the current stock price of $53.5. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether St. Joe can afford its dividend, and if the dividend could grow.
View our latest analysis for St. Joe
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. That's why it's good to see St. Joe paying out a modest 25% of its earnings. 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. The good news is it paid out just 18% of its free cash flow in the last year.
It's positive to see that St. Joe'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 St. Joe paid out over the last 12 months.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see St. Joe's earnings have been skyrocketing, up 43% per annum for the past five years. St. Joe is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.
Given that St. Joe has only been paying a dividend for a year, there's not much of a past history to draw insight from.
To Sum It Up
Is St. Joe an attractive dividend stock, or better left on the shelf? We love that St. Joe is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. There's a lot to like about St. Joe, and we would prioritise taking a closer look at it.
Want to learn more about St. Joe's dividend performance? Check out this visualisation of its historical revenue and earnings growth.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.
