UK markets closed
  • NIKKEI 225

    27,402.05
    +55.17 (+0.20%)
     
  • HANG SENG

    21,958.36
    -113.82 (-0.52%)
     
  • CRUDE OIL

    76.85
    +0.44 (+0.58%)
     
  • GOLD FUTURES

    1,927.20
    -15.60 (-0.80%)
     
  • DOW

    33,970.73
    -122.23 (-0.36%)
     
  • BTC-GBP

    19,562.82
    +706.26 (+3.75%)
     
  • CMC Crypto 200

    546.84
    +1.52 (+0.28%)
     
  • ^IXIC

    12,189.49
    +373.17 (+3.16%)
     
  • ^FTAS

    4,302.89
    +50.04 (+1.18%)
     

Scotts Miracle-Gro's (NYSE:SMG) Dividend Will Be $0.66

The board of The Scotts Miracle-Gro Company (NYSE:SMG) has announced that it will pay a dividend on the 9th of December, with investors receiving $0.66 per share. The dividend yield will be 4.9% based on this payment which is still above the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Scotts Miracle-Gro's stock price has reduced by 35% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

Check out our latest analysis for Scotts Miracle-Gro

Scotts Miracle-Gro's Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Despite not generating a profit, Scotts Miracle-Gro is still paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.

Looking forward, earnings per share is forecast to rise exponentially over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 17%, so there isn't too much pressure on the dividend.

historic-dividend
historic-dividend

Scotts Miracle-Gro Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2012, the dividend has gone from $1.20 total annually to $2.64. This works out to be a compound annual growth rate (CAGR) of approximately 8.2% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

The Dividend's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. In the last five years, Scotts Miracle-Gro's earnings per share has shrunk at approximately 2.5% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Scotts Miracle-Gro that investors should know about before committing capital to this stock. Is Scotts Miracle-Gro not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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