Scholastic (NASDAQ:SCHL) Is Due To Pay A Dividend Of $0.20
The board of Scholastic Corporation (NASDAQ:SCHL) has announced that it will pay a dividend of $0.20 per share on the 16th of March. This means the dividend yield will be fairly typical at 2.7%.
Scholastic's Distributions May Be Difficult To Sustain
We aren't too impressed by dividend yields unless they can be sustained over time. While Scholastic is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.
Analysts are expecting EPS to grow by 84.1% over the next 12 months. We like to see the company moving towards profitability, but this probably won't be enough for it to post positive net income this year. However, the positive cash flow ratio gives us some comfort about the sustainability of the dividend.
See our latest analysis for Scholastic
Scholastic Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2016, the annual payment back then was $0.60, compared to the most recent full-year payment of $0.80. This means that it has been growing its distributions at 2.9% per annum over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.
The Dividend's Growth Prospects Are Limited
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings has been rising at 4.7% per annum over the last five years, which admittedly is a bit slow. With no profits, we don't think Scholastic has much potential to grow the dividend in the future.
Our Thoughts On Scholastic's Dividend
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Scholastic's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. Overall, we don't think this company has the makings of a good income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Scholastic that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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