Juniper Networks, Inc. (NYSE:JNPR) is about to trade ex-dividend in the next 4 days. You can purchase shares before the 3rd of September in order to receive the dividend, which the company will pay on the 25th of September.
Juniper Networks’s upcoming dividend is US$0.19 a share, following on from the last 12 months, when the company distributed a total of US$0.76 per share to shareholders. Looking at the last 12 months of distributions, Juniper Networks has a trailing yield of approximately 3.3% on its current stock price of $22.78. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
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. Juniper Networks paid out 52% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Thankfully its dividend payments took up just 47% of the free cash flow it generated, which is a comfortable payout ratio.
It’s encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don’t drop precipitously.
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, Juniper Networks’s earnings per share have been growing at 10% a year for the past five years. Juniper Networks is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. This is a reasonable combination that could hint at some further dividend increases in the future.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Juniper Networks has delivered an average of 14% per year annual increase in its dividend, based on the past 5 years of dividend payments. It’s exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
Should investors buy Juniper Networks for the upcoming dividend? Juniper Networks’s growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. Juniper Networks looks solid on this analysis overall, and we’d definitely consider investigating it more closely.
Ever wonder what the future holds for Juniper Networks? See what the 22 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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.
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