Scholastic's (NASDAQ:SCHL) Dividend Will Be $0.20

The board of Scholastic Corporation (NASDAQ:SCHL) has announced that it will pay a dividend on the 16th of March, with investors receiving $0.20 per share. This means that the annual payment will be 3.0% of the current stock price, which is in line with the average for the industry.

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Scholastic Might Find It Hard To Continue The Dividend

Solid dividend yields are great, but they only really help us if the payment is sustainable. Even though Scholastic isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. This gives us some comfort about the level of the dividend payments.

Analysts are expecting EPS to grow by 84.1% over the next 12 months. We like to see the company moving towards profitability, but this probably won't be enough for it to post positive net income this year. However, the positive cash flow ratio gives us some comfort about the sustainability of the dividend.

Check out our latest analysis for Scholastic

Scholastic Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the dividend has gone from $0.60 total annually to $0.80. This implies that the company grew its distributions at a yearly rate of about 2.9% over that duration. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

The Dividend's Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings has been rising at 4.7% per annum over the last five years, which admittedly is a bit slow. Scholastic isn't actually turning a profit, which makes it much harder for us to see how they can grow dividends.

Our Thoughts On Scholastic's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Scholastic's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for Scholastic you should be aware of, and 1 of them is a bit concerning. If you are a dividend investor, you might also want to look at our curated 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.