Johnson Outdoors Inc. (NASDAQ:JOUT) stock is about to trade ex-dividend in 3 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Johnson Outdoors' shares before the 9th of October in order to receive the dividend, which the company will pay on the 23rd of October.
The company's next dividend payment will be US$0.33 per share, and in the last 12 months, the company paid a total of US$1.32 per share. Calculating the last year's worth of payments shows that Johnson Outdoors has a trailing yield of 2.9% on the current share price of US$44.91. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Johnson Outdoors lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. It distributed 46% of its free cash flow as dividends, a comfortable payout level for most companies.
See our latest analysis for Johnson Outdoors
Click here to see how much of its profit Johnson Outdoors paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Johnson Outdoors reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Johnson Outdoors has lifted its dividend by approximately 15% a year on average.
We update our analysis on Johnson Outdoors every 24 hours, so you can always get the latest insights on its financial health, here.
Final Takeaway
Should investors buy Johnson Outdoors for the upcoming dividend? It's hard to get used to Johnson Outdoors paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. Bottom line: Johnson Outdoors has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.
So if you're still interested in Johnson Outdoors despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. Every company has risks, and we've spotted 2 warning signs for Johnson Outdoors you should know about.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.