Steelcase: Behind the Scenes of the Dividend Policy

Steelcase investors can anticipate an upcoming dividend payment of $0.10 per share to be distributed on January 13. This corresponds to a dividend yield of 3.4%, which appealingly enhances shareholder returns. However, a high dividend yield alone is not enough to guarantee the sustainability of the payment. Fortunately, Steelcase's dividend is well covered by cash flow and earnings. This suggests that the company reinvests a significant portion of its earnings to foster future growth. The forecasts are optimistic: an increase in earnings per share of 20.8% is expected for the coming year. If the dividend policy continues as before, the payout ratio is likely to be 34%, a level that reassures us regarding sustainability. However, it should be noted that Steelcase's dividend has been cut at least once in the past ten years. In 2014, the annual dividend was $0.42, and more recently, it was $0.40. The reduction range was less than 1% annually, which is by no means ideal for dividend investors, as it could indicate potential issues within the company. Given these uncertainties, a close look at earnings development is crucial. Over the past five years, earnings per share have declined by 5.7% annually. Despite the modest declines, there is a silver lining: an increase in earnings is expected over the next 12 months. Nevertheless, caution is advised until a sustained positive trend emerges. Overall, Steelcase does not appear to be an outstanding dividend stock. Although the payouts have remained stable recently, they have been inconsistent in the past. In the short term, dividend payments may be reliable, but if income generation is the main focus, Steelcase may be less suitable for your portfolio. Shareholders generally tend to prefer companies with a consistent dividend policy. On the other hand, there are also other factors to consider when analyzing stock performance.