Scholastic (NASDAQ:SCHL) Has Affirmed Its Dividend Of $0.20

Scholastic Corporation (NASDAQ:SCHL) will pay a dividend of $0.20 on the 15th of December. This means the dividend yield will be fairly typical at 3.3%.

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Scholastic's Projections Indicate Future Payments May Be Unsustainable

Estimates Indicate Scholastic's Could Struggle to Maintain Dividend Payments In The Future

Scholastic's Future Dividends May Potentially Be At Risk

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Scholastic is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

Earnings per share is forecast to rise by 121.4% over the next year. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio getting very high over the next year.

Check out our latest analysis for Scholastic

Scholastic Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $0.60 in 2015, and the most recent fiscal year payment was $0.80. This implies that the company grew its distributions at a yearly rate of about 2.9% over that duration. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Company Could Face Some Challenges Growing The Dividend

Investors could be attracted to the stock based on the quality of its payment history. Scholastic has seen EPS rising for the last five years, at 16% per annum. Even though the company isn't making a profit, strong earnings growth could turn that around in the near future. As long as the company becomes profitable soon, it is on a trajectory that could see it being a solid dividend payer.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We would probably look elsewhere for an income investment.

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. For instance, we've picked out 1 warning sign for Scholastic that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.