There's A Lot To Like About Jacobs Engineering Group's (NYSE:J) Upcoming US$0.23 Dividend
Jacobs Engineering Group Inc. (NYSE:J) stock is about to trade ex-dividend in four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Meaning, you will need to purchase Jacobs Engineering Group's shares before the 24th of February to receive the dividend, which will be paid on the 25th of March.
The company's upcoming dividend is US$0.23 a share, following on from the last 12 months, when the company distributed a total of US$0.92 per share to shareholders. Based on the last year's worth of payments, Jacobs Engineering Group stock has a trailing yield of around 0.8% on the current share price of $119.65. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Jacobs Engineering Group has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Jacobs Engineering Group
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. Jacobs Engineering Group paid out a comfortable 38% of its profit last year. A useful secondary check can be to evaluate whether Jacobs Engineering Group generated enough free cash flow to afford its dividend. Luckily it paid out just 19% of its free cash flow last 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.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at Jacobs Engineering Group, with earnings per share up 4.9% on average over the last five years. Recent earnings growth has been limited. Yet there are several ways to grow the dividend, and one of them is simply that the company may choose to pay out more of its earnings as dividends.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, five years ago, Jacobs Engineering Group has lifted its dividend by approximately 8.9% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
Has Jacobs Engineering Group got what it takes to maintain its dividend payments? Earnings per share growth has been growing somewhat, and Jacobs Engineering Group is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but Jacobs Engineering Group is being conservative with its dividend payouts and could still perform reasonably over the long run. Jacobs Engineering Group looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
While it's tempting to invest in Jacobs Engineering Group for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 2 warning signs for Jacobs Engineering Group you should be aware of.
If you're in the market for strong dividend payers, we recommend checking our selection of top 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.
