John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS) is about to trade ex-dividend in the next 4 days. You will need to purchase shares before the 5th of August to receive the dividend, which will be paid on the 20th of August.
John B. Sanfilippo & Son's upcoming dividend is US$3.00 a share, following on from the last 12 months, when the company distributed a total of US$3.00 per share to shareholders. Calculating the last year's worth of payments shows that John B. Sanfilippo & Son has a trailing yield of 3.4% on the current share price of $87.45. 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! We need to see whether the dividend is covered by earnings and if it's growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. John B. Sanfilippo & Son paid out just 19% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether John B. Sanfilippo & Son generated enough free cash flow to afford its dividend. Fortunately, it paid out only 49% 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.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see John B. Sanfilippo & Son earnings per share are up 8.1% per annum over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. John B. Sanfilippo & Son has delivered 15% dividend growth per year on average over the past 5 years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Is John B. Sanfilippo & Son an attractive dividend stock, or better left on the shelf? Earnings per share have been growing moderately, and John B. Sanfilippo & Son is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and John B. Sanfilippo & Son is halfway there. Overall we think this is an attractive combination and worthy of further research.
Curious about whether John B. Sanfilippo & Son has been able to consistently generate growth? Here's a chart of its historical revenue and earnings growth.
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.
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