Yahoo Finance SLM (NASDAQ:SLM) Has Affirmed Its Dividend Of $0.11
SLM Corporation's (NASDAQ:SLM) investors are due to receive a payment of $0.11 per share on 17th of June. This payment means that the dividend yield will be 2.0%, which is around the industry average.
Check out our latest analysis for SLM
SLM's Dividend Is Well Covered By Earnings
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last payment, SLM was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.
Over the next year, EPS is forecast to fall by 4.2%. If the dividend continues along recent trends, we estimate the payout ratio could be 14%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
SLM Is Still Building Its Track Record
The dividend's track record has been pretty solid, but with only 5 years of history we want to see a few more years of history before making any solid conclusions. The annual payment during the last 5 years was $0.12 in 2019, and the most recent fiscal year payment was $0.44. This implies that the company grew its distributions at a yearly rate of about 30% over that duration. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. SLM has impressed us by growing EPS at 24% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.
Our Thoughts On SLM's Dividend
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about SLM's payments, as there could be some issues with sustaining them into the future. While SLM is earning enough to cover the payments, the cash flows are lacking. 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. To that end, SLM has 5 warning signs (and 3 which make us uncomfortable) we think you should know about. Is SLM not quite the opportunity you were looking for? Why not check out our selection of top 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.
