Today is Thursday, April 11, 2019, and this is your daily dividend safety update. Today we’re looking at Johnson Controls (NYSE: JCI) stock to see whether its 2.91% dividend is safe.
Let’s look at the company’s payout ratio, cash flow growth, and dividend history to gauge the probability of a dividend cut in the next few years.
Payout Ratio (Dividends/Earnings)
Johnson Controls has a payout ratio of 42.06%. That’s low enough for us! Payout ratio equals dividends per share divided by earnings per share. A low payout ratio indicates that the company has plenty of money to cover its dividend. We’d be more concerned if the ratio was closer to 100% (or over it).
Cash Flow Growth Year-Over-Year
Johnson Controls has grown its cash flow by 6.07% in the last year. That’s a good omen for dividend investors! When a company grows its cash flow, it can use some of that extra cash to strengthen — or even raise — its dividend.
Dividend History & Recent Cuts
Johnson Controls has a recent history of dividend cuts. In fact, it’s only been 3 years since the last cut. That’s not a good sign. Companies that have recently cut their dividend are generally more likely to cut them again.
The Takeaway
Johnson Controls stock has failed 1 of our 3 dividend safety metrics. With that in mind, we believe a dividend cut is possible in the next few years.
We’ve been keeping an eye on some dividend stocks that could be better for your income portfolio than Johnson Controls. These dividends are much bigger — and safer — than the paltry yields many investors settle for. Enter your email below to learn more.
P.S. Are you worried about the safety of your dividend stocks? Is there a particular stock you want us to grade next? Leave the ticker symbol in the comment section below.
