In This Article:
Ennis, Inc. (NYSE:EBF) has announced that it will pay a dividend of $0.25 per share on the 5th of August. This makes the dividend yield 4.5%, which will augment investor returns quite nicely.
See our latest analysis for Ennis
Ennis' Earnings Easily Cover The Distributions
If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Ennis' dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.
If the trend of the last few years continues, EPS will grow by 2.0% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 64%, which is in the range that makes us comfortable with the sustainability of the dividend.
Ennis Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the annual payment back then was $0.70, compared to the most recent full-year payment of $1.00. This implies that the company grew its distributions at a yearly rate of about 3.6% over that duration. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.
Ennis May Find It Hard To Grow The Dividend
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Ennis hasn't seen much change in its earnings per share over the last five years. Ennis is struggling to find viable investments, so it is returning more to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.
Ennis Looks Like A Great Dividend Stock
Overall, we like to see the dividend staying consistent, and we think Ennis might even raise payments in the future. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. See if management have their own wealth at stake, by checking insider shareholdings in Ennis stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.