Last update on 2024-06-27

Jack Henry & Associates (JKHY) - Dividend Analysis (Final Score: 8/8)

Explore Jack Henry & Associates' (JKHY) stellar dividend performance with an 8/8 score. Discover in-depth dividend growth, payout ratios, and more from 2003-2023.

Short Analysis - Dividend Score: 8

We're running Jack Henry & Associates (JKHY) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

Jack Henry & Associates (JKHY) is being evaluated based on an 8-criteria scoring system focusing on dividend performance and stability, receiving a strong score of 8. Key highlights include a dividend yield of 1.2729%, which surpasses the industry average, and an impressive average annual dividend growth rate of 14.19% over the last 20 years. The company also has a conservative average payout ratio of 32.49%, well below the 65% threshold. JKHY's earnings have consistently covered its dividend payments, indicating safe dividends. Moreover, the company has provided stable and increasing dividends since 2003, has been paying dividends for over 25 years, and engages in reliable stock repurchasing, suggesting strong financial health and management confidence.

Insights for Value Investors Seeking Stable Income

Based on the analysis, JKHY demonstrates strong dividend performance and stability, making it a worthwhile consideration for income-focused investors. The company's consistent dividend growth, sustainable payout ratios, and impressive track record of stable payments and stock repurchases make it an attractive option for those seeking reliable dividend income and long-term financial health. However, potential investors should continue to monitor the company's ability to maintain these trends.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price. It is a crucial metric for income-focused investors and indicates the return on investment from dividends alone.

Jack Henry & Associates (JKHY) has a dividend yield of 1.2729%, which is higher than the industry average of 1.12%. Historically, JKHY's dividend yield has fluctuated, reaching a high of 1.5456% in 2008 and a low of 0.6803% in 2003. Over the last 20 years, JKHY's yield has consistently stayed within a close range, often mirroring broader market or industry trends but slightly lagging the exceptional peaks. Generally, a higher-than-average dividend yield is favorable as it provides a better return on investment. Given that JKHY has managed to exceed the industry average recently and has shown a general upward trend in dividend yield (closing at 1.2729% in 2023), this is a positive signal for potential and current investors. However, it is also essential to consider the stability and growth potential of these dividend payments to ensure that they are sustainable in the long run.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate criterion evaluates whether the company's dividend per share has increased by at least 5% annually, on average, over the last 20 years.

Over the past 20 years, the dividend per share ratio for Jack Henry & Associates (JKHY) shows a fluctuating trend. The average dividend ratio stands at approximately 14.19%. This indicates that, on average, the company has increased its dividend each year by around 14.19%, which is significantly higher than the 5% threshold. Despite some years where the growth is below 5%, such as 2020 at 7.5% and incremental drops certain years, the overall trend meets and exceeds the 5% criterion. This is a positive sign for investors seeking reliable and growing dividends, as it underscores the company's consistent ability to enhance shareholder value through increasing dividends.

Average annual Payout Ratio lower than 65% in the last 20 years?

The average payout ratio measures what portion of earnings a company is distributing to shareholders as dividends. It's important because a lower ratio indicates that the company is retaining more of its earnings for growth and other activities.

The average payout ratio for Jack Henry & Associates over the last 20 years is approximately 32.49%. This is well below the 65% threshold, which is considered prudent and sustainable. The highest payout ratio in these years was 45.31% in 2019, which still falls below the critical threshold. A significant portion of the years listed showed ratios comfortably lower than 30%, reflecting a conservative approach. This aligns well with the company's strategy to retain earnings for reinvestment while also providing reasonable shareholder returns. The trend is very good for this criterion, as it implies financial stability and room for dividend growth.

Dividends Well Covered by Earnings?

Explain the criterion for Jack Henry & Associates (JKHY) and why it is important to consider

This criterion evaluates JKHY's ability to cover dividend payments with its earnings. A higher ratio implies a safer dividend. From 2003 to 2023, earnings per share consistently outpaced dividends per share, highlighting a strong coverage with ratios typically above 0.22. The ratio peaks in 2019 at 0.45 indicating exceptionally safe dividends. Overall, this trend is positive and underscores JKHY's robust earning power supporting its dividends.

Dividends Well Covered by Cash Flow?

Explain the criterion for Jack Henry & Associates (JKHY) and why it is important to consider

Criterion 3, 'Dividends Well Covered by Cash Flow', examines the proportion of free cash flow that is used to pay dividends. This is a crucial metric because it measures whether a company generates sufficient cash flow to sustain and potentially grow its dividend payments. A lower ratio typically signifies a more sustainable and possibly growing dividend, while a higher ratio may pose risks of a dividend cut if cash flow declines.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments, where the dividend per share did not drop by more than 20% over the past two decades, is of utmost importance for income-seeking investors.

Looking at the dividend payouts from 2003 to 2023, we observe a steady increase from $0.14 per share to $2.08 per share. This gives an impression of strong stability and confidence from Jack Henry & Associates in rewarding its shareholders. Interestingly, the data shows that there was no year where the dividend payment dropped by 20% or more. This consistency in dividend payment is positive and suggests that the company values its income-seeking investors and has managed its financials well to support regular dividend payouts. The consistent increase, without any significant drop, speaks to the long-term sustainability and reliability of the dividends provided by JKHY.

Dividends Paid for Over 25 Years?

Explain the criterion for Jack Henry & Associates (JKHY) and why it is important to consider

Long-term dividend payments often reflect a company's ability to generate stable, recurring revenue. Longevity in dividends can signal financial health.

Reliable Stock Repurchases Over the Past 20 Years?

Explain why examining reliable stock repurchases over the past 20 years is important.

Stock repurchasing can be a significant indicator of a company’s confidence in its future prospects and financial health. When a company consistently buys back its shares, it often suggests management believes the stock is undervalued or that the company is performing well enough to return cash to shareholders. This action can positively impact earnings per share (EPS) and investor sentiment. Historically, reliable repurchases often lead to greater shareholder value over time.