Yahoo Finance SLM (NASDAQ:SLM) Has Announced A Dividend Of $0.11
The board of SLM Corporation (NASDAQ:SLM) has announced that it will pay a dividend on the 15th of June, with investors receiving $0.11 per share. This means that the annual payment will be 2.9% of the current stock price, which is in line with the average for the industry.
View our latest analysis for SLM
SLM's Dividend Is Well Covered By Earnings
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. SLM is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.
Over the next year, EPS is forecast to expand by 70.8%. If the dividend continues on this path, the payout ratio could be 21% by next year, which we think can be pretty sustainable going forward.
SLM Doesn't Have A Long Payment History
The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. Since 2019, the dividend has gone from $0.12 total annually to $0.44. This means that it has been growing its distributions at 38% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that SLM has grown earnings per share at 21% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.
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. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. To that end, SLM has 3 warning signs (and 2 which are a bit unpleasant) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
