Don't Buy John Wiley & Sons, Inc. (NYSE:WLY) For Its Next Dividend Without Doing These Checks
John Wiley & Sons, Inc. (NYSE:WLY) stock is about to trade ex-dividend in 3 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase John Wiley & Sons' shares before the 30th of December in order to receive the dividend, which the company will pay on the 15th of January.
The company's next dividend payment will be US$0.355 per share. Last year, in total, the company distributed US$1.42 to shareholders. Last year's total dividend payments show that John Wiley & Sons has a trailing yield of 4.5% on the current share price of US$31.31. 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! So we need to investigate whether John Wiley & Sons can afford its dividend, and if the dividend could grow.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. John Wiley & Sons is paying out an acceptable 74% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether John Wiley & Sons generated enough free cash flow to afford its dividend. Over the last year it paid out 58% of its free cash flow as dividends, within the usual range for most companies.
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.
View our latest analysis for John Wiley & Sons
Click here to see how much of its profit John Wiley & Sons paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Readers will understand then, why we're concerned to see John Wiley & Sons's earnings per share have dropped 18% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, John Wiley & Sons has lifted its dividend by approximately 2.0% a year on average. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it's always worth checking for when the company can't increase the payout ratio any more - because then the music stops.
To Sum It Up
Is John Wiley & Sons an attractive dividend stock, or better left on the shelf? While earnings per share are shrinking, it's encouraging to see that at least John Wiley & Sons's dividend appears sustainable, with earnings and cashflow payout ratios that are within reasonable bounds. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.
So if you're still interested in John Wiley & Sons despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. For example, we've found 2 warning signs for John Wiley & Sons that we recommend you consider before investing in the business.
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.