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Ennis, Inc.'s (NYSE:EBF) investors are due to receive a payment of $0.25 per share on 6th of February. The dividend yield will be 4.7% based on this payment which is still above the industry average.
View our latest analysis for Ennis
Estimates Indicate Ennis' Could Struggle to Maintain Dividend Payments In The Future
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Ennis was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.
Earnings per share could rise by 1.8% over the next year if things go the same way as they have for the last few years. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 226% over the next year.
Ennis Has A Solid Track Record
The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.70 in 2014 to the most recent total annual payment of $1.00. This implies that the company grew its distributions at a yearly rate of about 3.6% over that duration. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.
Dividend Growth May Be Hard To Achieve
The company's investors will be pleased to have been receiving dividend income for some time. Although it's important to note that Ennis' earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. Ennis is struggling to find viable investments, so it is returning more to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.
Ennis Looks Like A Great Dividend Stock
Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in Ennis stock. 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.