It looks like Just Life Group Limited (NZSE:JLG) is about to go ex-dividend in the next 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase Just Life Group's shares on or after the 29th of November will not receive the dividend, which will be paid on the 7th of December.
The company's next dividend payment will be NZ$0.016 per share, and in the last 12 months, the company paid a total of NZ$0.024 per share. Based on the last year's worth of payments, Just Life Group stock has a trailing yield of around 2.8% on the current share price of NZ$0.86. If you buy this business for its dividend, you should have an idea of whether Just Life Group's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
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. Just Life Group paid out 66% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Just Life Group generated enough free cash flow to afford its dividend. Luckily it paid out just 9.9% of its free cash flow last year.
It's positive to see that Just Life Group's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Just Life Group's earnings per share have risen 15% per annum over the last five years. Just Life Group has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Just Life Group has delivered 4.7% dividend growth per year on average over the past four years. Earnings per share have been growing much quicker than dividends, potentially because Just Life Group is keeping back more of its profits to grow the business.
The Bottom Line
Is Just Life Group an attractive dividend stock, or better left on the shelf? We like Just Life Group's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. Overall we think this is an attractive combination and worthy of further research.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example, we've found 5 warning signs for Just Life Group that we recommend you consider before investing in the business.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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.
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