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Don't Buy Nielsen Holdings plc (NYSE:NLSN) For Its Next Dividend Without Doing These Checks

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Simply Wall St
·3 min read
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Nielsen Holdings plc (NYSE:NLSN) stock is about to trade ex-dividend in three days. This means that investors who purchase shares on or after the 3rd of March will not receive the dividend, which will be paid on the 18th of March.

Nielsen Holdings's next dividend payment will be US$0.06 per share, and in the last 12 months, the company paid a total of US$0.24 per share. Based on the last year's worth of payments, Nielsen Holdings stock has a trailing yield of around 1.1% on the current share price of $22.41. If you buy this business for its dividend, you should have an idea of whether Nielsen Holdings's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Nielsen Holdings

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Nielsen Holdings paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. The good news is it paid out just 18% of its free cash flow in the last year.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Nielsen Holdings was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Nielsen Holdings has seen its dividend decline 12% per annum on average over the past eight years, which is not great to see. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

Get our latest analysis on Nielsen Holdings's balance sheet health here.

The Bottom Line

Is Nielsen Holdings worth buying for its dividend? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Nielsen Holdings.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Nielsen Holdings. To help with this, we've discovered 2 warning signs for Nielsen Holdings (1 is significant!) that you ought to be aware of before buying the shares.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

This article by Simply Wall St is general in nature. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.