JM Smucker Company (NYSE: SJM) the dividend will increase to US $ 0.99 on September 1. The announced payout will bring the dividend yield to 2.8%, which is in line with the industry average.
See our latest review for JM Smucker
JM Smucker’s payout has strong revenue coverage
Strong dividend yields are great, but they only really help us if the payout is sustainable. Prior to this announcement, JM Smucker’s dividend was comfortably covered by both cash flow and earnings. This indicates that a large portion of the profits are reinvested in the business, with the aim of fueling growth.
EPS is expected to decline 0.6% over the next 12 months. If the dividend continues according to recent trends, we estimate the payout ratio could be 51%, which we consider comfortable enough with most of the company’s profits remaining to grow the business in the future.
JM Smucker has a solid track record
The company has a long history of paying stable dividends. The dividend went from US $ 1.60 in 2011 to the most recent annual payment of US $ 3.96. This implies that the company has increased its distributions at an annual rate of approximately 9.5% over this period. Businesses like this can be of great benefit in the long run, if a decent rate of growth can be maintained.
The dividend has growth potential
Investors in the company will be happy to receive dividends for some time. JM Smucker has impressed us by increasing EPS by 6.2% per year over the past five years. The company is paying a reasonable amount of profit to shareholders and growing its profits at a decent rate, so we think it could be a decent dividend stock.
We really like the dividend from JM Smucker
Overall, a dividend increase is always good, and we think JM Smucker is a solid income stock thanks to its track record and growing earnings. The company generates a lot of cash, and profits also cover distributions quite easily. If earnings decline over the next 12 months, the dividend could be shaken slightly, but we don’t think that should be too much of a problem in the long run. Overall, this ticks a lot of the boxes that we look for when choosing an income stock.
Market movements testify to the high value of a coherent dividend policy compared to a more unpredictable one. At the same time, there are other factors that our readers should be aware of before investing any capital in a stock. Taking the debate a little further, we identified 2 warning signs for JM Smucker that investors need to be aware of moving forward. We have also set up a list of global stocks with a solid dividend.
If you are looking to trade JM Smucker, open an account with the cheapest * professional approved platform, Interactive Brokers. Their clients from more than 200 countries and territories trade stocks, options, futures, currencies, bonds and funds around the world from a single integrated account.
This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.
*Interactive Brokers Ranked Least Expensive Broker By StockBrokers.com Online Annual Review 2020
Do you have any feedback on this item? Are you worried about the content? Get in touch with us directly. You can also send an email to the editorial team (at) simplywallst.com.