The board of Johnson Outdoors Inc. (NASDAQ:JOUT) has announced that it will pay a dividend on the 24th of October, with investors receiving $0.33 per share. This payment means that the dividend yield will be 3.2%, which is around the industry average.

Johnson Outdoors' Projections Indicate Future Payments May Be Unsustainable

Estimates Indicate Johnson Outdoors' Could Struggle to Maintain Dividend Payments In The Future

Johnson Outdoors' Future Dividends May Potentially Be At Risk

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Even though Johnson Outdoors isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. This gives us some comfort about the level of the dividend payments.

Over the next year, EPS is forecast to expand by 117.3%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio getting very high over the next year.

Johnson Outdoors Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the dividend has gone from $0.30 total annually to $1.32. This means that it has been growing its distributions at 16% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Dividend Growth Potential Is Shaky

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. Earnings per share has been sinking by 53% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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.