The Board of Directors of Jefferies Financial Group (NYSE:JEF) announced that it will pay a dividend of $0.35 per share on November 27th. This brings the dividend yield to about the same as the industry average of 2.3%.
Check out our latest analysis for Jefferies Financial Group.
Jefferies Financial Group’s payout could cover solid earnings
We like to see a healthy dividend yield, but that’s only helpful if the payments can continue. Prior to this announcement, Jefferies Financial Group’s profits easily covered its dividend, but free cash flow was negative. We generally believe cash flow is more important than profit, so we’d be wary of relying on the sustainability of this dividend.
EPS is expected to increase by 157.2% next year. If dividends continue in line with recent trends, the dividend payout ratio is expected to be 25%, which is within a range that is fully satisfactory in terms of dividend sustainability.
historic dividend
Jefferies Financial Group has a proven track record
The company has been paying dividends for a long time and is very stable, so we are confident in its future dividend potential. The annual payment for the past 10 years was $0.25 in 2014, and the most recent fiscal year payment was $1.40. This works out to be a compound annual growth rate (CAGR) of approximately 19% over that period. Fast-growing dividends over long periods of time are an invaluable feature for income stocks.
Dividend growth prospects are limited
Investors in the company will be happy to receive dividend income for some time to come. Unfortunately, things aren’t as good as they seem. Over the past 5 years, Jefferies Financial Group’s EPS has appeared to be decreasing at around 5.0% per year. A slight decline in earnings is not a big deal, and unless the trend can be reversed, future dividend increases are highly unlikely. Revenues are expected to increase over the next 12 months, and even if they do, we might still be a little cautious until we see a pattern.
In summary
The dividend is increasing at the moment, but overall this is probably not a great return stock. Jefferies Financial Group generates enough revenue to cover payments, but lacks cash flow. You’ll probably look elsewhere for more profitable investments.
Market movements prove how highly valued a consistent dividend policy is compared to a more unpredictable dividend policy. At the same time, there are other factors that readers should be aware of before pouring capital into stocks. For example, we’ve picked 1 warning sign for Jefferies Financial Group that investors should consider. Is Jefferies Financial Group the opportunity you’ve been looking for? Why not check out our selection of high dividend stocks?
Do you have feedback on this article? Interested in its content? Please contact us directly. Alternatively, email our editorial team at Simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary using only unbiased methodologies, based on historical data and analyst forecasts, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
