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Don't Race Out To Buy Nielsen Holdings plc (NYSE:NLSN) Just Because It's Going Ex-Dividend

Simply Wall St

It looks like Nielsen Holdings plc (NYSE:NLSN) is about to go ex-dividend in the next 4 days. You will need to purchase shares before the 4th of March to receive the dividend, which will be paid on the 19th of March.

Nielsen Holdings's upcoming dividend is US$0.06 a share, following on from the last 12 months, when the company distributed a total of US$0.24 per share to shareholders. Calculating the last year's worth of payments shows that Nielsen Holdings has a trailing yield of 1.3% on the current share price of $18.58. If you buy this business for its dividend, you should have an idea of whether Nielsen Holdings's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Nielsen Holdings

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Nielsen Holdings reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If Nielsen Holdings didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. It paid out 76% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

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

NYSE:NLSN Historical Dividend Yield, February 28th 2020
NYSE:NLSN Historical Dividend Yield, February 28th 2020

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. 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.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Nielsen Holdings has seen its dividend decline 13% per annum on average over the past seven 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.

We update our analysis on Nielsen Holdings every 24 hours, so you can always get the latest insights on its financial health, here.

Final Takeaway

Is Nielsen Holdings an attractive dividend stock, or better left on the shelf? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. Bottom line: Nielsen Holdings has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

Ever wonder what the future holds for Nielsen Holdings? See what the 13 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.