Interested In J. M. Smucker’s (NYSE:SJM) Upcoming US$0.99 Dividend? You Have Four Days Left

Regular readers will know we love our dividends at Simply Wall St, which is why it’s exciting to see The JM Smucker Company (NYSE:SJM) is set to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before the record date, which is the latest date by which shareholders must be present on the books of the company to be eligible for payment of a dividend. It is important to know the ex-dividend date, because any trade in the stock must have settled on or before the record date. This means that you will need to buy JM Smucker shares by February 10 to receive the dividend, which will be paid on March 1.

The company’s next dividend is $0.99 per share, after the last 12 months when the company distributed a total of $3.96 per share to shareholders. Based on last year’s payouts, JM Smucker stock has a yield of about 2.9% on the current share price of $136.87. We love to see companies pay out a dividend, but it’s also important to make sure that laying the golden eggs doesn’t kill our golden hen! We need to see if the dividend is covered by earnings and if it increases.

See our latest analysis for JM Smucker

Dividends are usually paid out of company profits, so if a company pays out more than it has earned, its dividend is usually at risk of being reduced. JM Smucker pays out an acceptable 54% of its profits, a common payout level for most companies. Still, cash flow is usually more important than earnings in assessing the sustainability of dividends, so we always need to check whether the company has generated enough cash to pay its dividend. It has paid out more than half (52%) of its free cash flow in the past year, which is in the middle range for most companies.

It is encouraging to see that the dividend is covered by both earnings and cash flow. This generally suggests that the dividend is sustainable, as long as earnings don’t drop precipitously.

Click here to see the company’s payout ratio, as well as analysts’ estimates of its future dividends.

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Have earnings and dividends increased?

Companies with consistently rising earnings per share tend to create the best dividend-paying stocks because they generally find it easier to increase dividends per share. Investors love dividends, so if earnings fall and the dividend is cut, expect a stock to sell strongly at the same time. That’s why it’s a relief to see JM Smucker’s earnings per share grow 4.2% a year over the past five years. Earnings growth has been weak and the company is paying out more than half of its profits. Although it is possible to both increase the payout ratio and reinvest in the business, generally the higher the payout ratio, the lower the prospects for future growth of a business.

Another key way to gauge a company’s dividend outlook is to measure its historical rate of dividend growth. Over the past 10 years, JM Smucker has increased its dividend by about 8.4% per year on average. We are pleased to see dividends increasing alongside earnings over several years, which may be a sign that the company intends to share the growth with shareholders.

To sum up

Is JM Smucker worth buying for its dividend? Earnings per share growth has not been remarkable, and although the company pays out the majority of its earnings and cash flow in the form of dividends, the dividend payouts do not appear to be excessive. All in all, not a bad combination, but we believe there are probably more attractive dividend prospects.

However, if you are still interested in JM Smucker as a potential investment, you should definitely consider some of the risks associated with JM Smucker. To help you, we found 2 warning signs for JM Smucker which you should be aware of before investing in their stocks.

If you’re looking for dividend-paying stocks, we recommend checking out our list of the best dividend-paying stocks with a yield above 2% and an upcoming dividend.

Feedback on this article? Concerned about content? Get in touch with us directly. You can also email the editorial team (at) Simplywallst.com.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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