Meredith’s Dividend History and Safety

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Some of the world’s best investors stick to dividend portfolios. They know that a steady stream of income is a top wealth building strategy. And finding the best deals is vital. So today, we’re going to review another one of the best dividend stocks around. Let’s take a look at Meredith’s dividend history and safety…

Meredith is a $2.3 billion dollar business. The company is based out of Des Moines, IA and it employs 7.9 thousand people. Last year Meredith pulled in $2.2 billion in sales and that breaks down to $284 thousand per employee.

The company runs within the communications sector and maintains a credit rating (B+) from the S&P. This allows Meredith to issue debt to expand operations and pay dividends.

One way the business expanded in the last year was by acquiring Time Inc. It was a valued at $2.8 billion. The new revenue from Time Inc. might help with future cash flows. The company also paid another dividend last month.

10-Year Dividend History

The company paid investors $0.88 per share a decade ago. Over the last 10 years, the dividend has climbed to $2.13. That’s a 142% increase and you can see the annual changes below…

The compound annual growth is 9.2% over 10 years… but over the last year, the dividend climbed 4.9%. The slowdown in dividend growth isn’t a great sign. Although, Meredith still might be a good income investment. Let’s take a look at the yield…

Current Yield vs. 10-Year Average

Meredith’s long history of paying dividends makes it one of the best dividend stocks around. This also makes the dividend yield a great indicator of value. A higher yield is generally better for buyers. Sustainability is also vital and we’ll look at that soon.

The dividend yield comes in at 4.24% and that’s below the 10-year average of 4.66%. The chart below shows the dividend yield over the last 10 years…

Meredith Dividend Yield History 10-Years

The lower yield shows that investors have bid up the company’s market value. They might be expecting higher growth and payouts. But more often than not, the dividend yield is mean reverting with share price changes.

Improved Dividend Safety Check

Many investors look at the payout ratio to determine dividend safety. They look at the dividend per share divided by the net income per share. So a payout ratio of 60% would mean that every $1 Meredith earns, it pays investors $0.60.

The payout ratio is a good indicator of dividend safety… but accountants manipulate net income. They adjust for goodwill and other non-cash items. A better metric is free cash flow.

Here’s Meredith payout ratio based on free cash flow over the last 10 years…

Meredith's Dividend Payout Ratio 10-Years

The ratio is volatile over the last 10 years and the trend is up. The last year shows a payout ratio of 97.4%. This doesn’t give much wiggle room for Meredith’s board of directors to raise the dividend.

Closing Thoughts on Meredith’s Dividend History and Safety

Meredith pays a solid dividend but it might not be the best stock to invest in. The trends show the dividend isn’t too safe for long-term investors.

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