It looks like Nine Entertainment Co. Holdings Limited (ASX:NEC) is about to go ex-dividend in the next 4 days. Ex-dividend means that investors that purchase the stock on or after the 9th of September will not receive this dividend, which will be paid on the 20th of October.
Nine Entertainment Holdings's next dividend payment will be AU$0.02 per share. Last year, in total, the company distributed AU$0.04 to shareholders. Looking at the last 12 months of distributions, Nine Entertainment Holdings has a trailing yield of approximately 2.4% on its current stock price of A$1.645. If you buy this business for its dividend, you should have an idea of whether Nine Entertainment 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.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Nine Entertainment 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 Nine Entertainment 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. Over the last year it paid out 71% of its free cash flow as dividends, within the usual range for most companies.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. Nine Entertainment Holdings reported a loss last year, but at least the general trend suggests its income has been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Nine Entertainment Holdings's dividend payments per share have declined at 0.8% per year on average over the past six years, which is uninspiring.
We update our analysis on Nine Entertainment Holdings every 24 hours, so you can always get the latest insights on its financial health, here.
The Bottom Line
From a dividend perspective, should investors buy or avoid Nine Entertainment Holdings? 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." Overall, it's hard to get excited about Nine Entertainment Holdings from a dividend perspective.
If you want to look further into Nine Entertainment Holdings, it's worth knowing the risks this business faces. For example - Nine Entertainment Holdings has 1 warning sign we think you should be aware of.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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.
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