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Readers hoping to buy Newell Brands Inc. (NASDAQ:NWL) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You can purchase shares before the 25th of February in order to receive the dividend, which the company will pay on the 15th of March.
Newell Brands's next dividend payment will be US$0.23 per share. Last year, in total, the company distributed US$0.92 to shareholders. Last year's total dividend payments show that Newell Brands has a trailing yield of 3.8% on the current share price of $24.32. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Newell Brands's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If Newell Brands 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. Thankfully its dividend payments took up just 33% of the free cash flow it generated, which is a comfortable payout ratio.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. Newell Brands 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. Newell Brands has delivered 16% dividend growth per year on average over the past 10 years.
We update our analysis on Newell Brands every 24 hours, so you can always get the latest insights on its financial health, here.
Is Newell Brands an attractive dividend stock, or better left on the shelf? It's hard to get used to Newell Brands paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Newell Brands.
So if you're still interested in Newell Brands despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. For example - Newell Brands 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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