Jefferies Financial Group's (NYSE:JEF) Dividend Will Be $0.35

Jefferies Financial Group Inc. (NYSE:JEF) will pay a dividend of $0.35 on the 27th of November. This makes the dividend yield about the same as the industry average at 2.3%.

View our latest analysis for Jefferies Financial Group

Jefferies Financial Group's Payment Could Potentially Have Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Based on the last payment, Jefferies Financial Group's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

The next year is set to see EPS grow by 157.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 25% by next year, which is in a pretty sustainable range.

Jefferies Financial Group Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from $0.25 total annually to $1.40. This means that it has been growing its distributions at 19% per annum over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

Dividend Growth May Be Hard To Achieve

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. Over the past five years, it looks as though Jefferies Financial Group's EPS has declined at around 5.0% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Jefferies Financial Group is earning enough to cover the payments, the cash flows are lacking. We don't think Jefferies Financial Group is a great stock to add to your portfolio if income is your focus.

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. Taking the debate a bit further, we've identified 1 warning sign for Jefferies Financial Group that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.