Juniper Networks, Inc. (NYSE:JNPR) will increase its dividend from last year's comparable payment on the 22nd of June to $0.22. This takes the annual payment to 3.0% of the current stock price, which is about average for the industry.
Juniper Networks' Earnings Easily Cover The Distributions
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Juniper Networks' earnings easily covered the dividend, but free cash flows were negative. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.
Looking forward, earnings per share is forecast to rise by 30.5% over the next year. If the dividend continues on this path, the payout ratio could be 47% by next year, which we think can be pretty sustainable going forward.
Juniper Networks Is Still Building Its Track Record
The dividend's track record has been pretty solid, but with only 9 years of history we want to see a few more years of history before making any solid conclusions. The annual payment during the last 9 years was $0.40 in 2014, and the most recent fiscal year payment was $0.88. This works out to be a compound annual growth rate (CAGR) of approximately 9.2% a year over that time. Investors will likely want to see a longer track record of growth before making decision to add this to their income portfolio.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Juniper Networks has grown earnings per share at 20% per year over the past five years. Juniper Networks is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.
Our Thoughts On Juniper Networks' Dividend
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Juniper Networks that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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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