The board of Jefferies Financial Group Inc. (NYSE:JEF) has announced that it will pay a dividend of $0.30 per share on the 30th of May. This payment means that the dividend yield will be 2.7%, which is around the industry average.
Check out our latest analysis for Jefferies Financial Group
Jefferies Financial Group’s Earnings Easily Cover The Distributions
Unless the payments are sustainable, the dividend yield doesn’t mean too much. Before this announcement, Jefferies Financial Group was paying out 96% of what it was earning, and not generating any free cash flows either. Paying out such a large dividend compared to earnings while also not generating free cash flows is a major warning sign for the sustainability of the dividend as these levels are certainly a bit high.
Looking forward, earnings per share is forecast to rise exponentially over the next year. Assuming the dividend continues along recent trends, we estimate that the payout ratio could reach 27%, which is in a comfortable range for us.
Jefferies Financial Group Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from $0.25 total annually to $1.20. This means that it has been growing its distributions at 17% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven’t experienced any notable falls during this period.
Jefferies Financial Group’s Dividend Might Lack Growth
Investors could be attracted to the stock based on the quality of its payment history. It’s encouraging to see that Jefferies Financial Group has been growing its earnings per share at 12% a year over the past five years. However, the payout ratio is very high, not leaving much room for growth of the dividend in the future.
The Dividend Could Prove To Be Unreliable
Overall, it’s nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. Although they have been consistent in the past, we think the payments are a little high to be sustained. Overall, we don’t think this company has the makings of a good income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we’ve come across 2 warning signs for Jefferies Financial Group you should be aware of, and 1 of them is a bit unpleasant. 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.
