It looks like Jack Henry & Associates, Inc. (NASDAQ:JKHY) is about to go ex-dividend in the next three days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Therefore, if you purchase Jack Henry & Associates' shares on or after the 30th of November, you won't be eligible to receive the dividend, when it is paid on the 22nd of December.
The company's next dividend payment will be US$0.49 per share, and in the last 12 months, the company paid a total of US$1.96 per share. Based on the last year's worth of payments, Jack Henry & Associates has a trailing yield of 1.0% on the current stock price of $191.42. 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 Jack Henry & Associates has been able to grow its dividends, or if the dividend might be cut.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately Jack Henry & Associates's payout ratio is modest, at just 38% of profit. A useful secondary check can be to evaluate whether Jack Henry & Associates generated enough free cash flow to afford its dividend. Fortunately, it paid out only 41% of its free cash flow in the past year.
It's positive to see that Jack Henry & Associates'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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Jack Henry & Associates's earnings per share have been growing at 11% a year for the past five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Jack Henry & Associates has increased its dividend at approximately 16% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
The Bottom Line
Is Jack Henry & Associates worth buying for its dividend? We love that Jack Henry & Associates is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. There's a lot to like about Jack Henry & Associates, and we would prioritise taking a closer look at it.
On that note, you'll want to research what risks Jack Henry & Associates is facing. In terms of investment risks, we've identified 1 warning sign with Jack Henry & Associates and understanding them should be part of your investment process.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.
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