Nelnet, Inc. (NYSE:NNI) Stock Goes Ex-Dividend In Just Four Days
Nelnet, Inc. (NYSE:NNI) is about to trade ex-dividend in the next 4 days. Investors can purchase shares before the 31st of August in order to be eligible for this dividend, which will be paid on the 15th of September.
Nelnet's next dividend payment will be US$0.20 per share. Last year, in total, the company distributed US$0.80 to shareholders. Based on the last year's worth of payments, Nelnet has a trailing yield of 1.2% on the current stock price of $65.23. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for Nelnet
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. Nelnet paid out a comfortable 25% of its profit last year.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Click here to see how much of its profit Nelnet paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Readers will understand then, why we're concerned to see Nelnet's earnings per share have dropped 14% a year over the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Nelnet has increased its dividend at approximately 11% a year on average.
The Bottom Line
Is Nelnet worth buying for its dividend? Nelnet's earnings per share are down over the past five years, although it has the cushion of a low payout ratio, which would suggest a cut to the dividend is relatively unlikely. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're on the fence about its dividend prospects.
However if you're still interested in Nelnet as a potential investment, you should definitely consider some of the risks involved with Nelnet. We've identified 4 warning signs with Nelnet (at least 2 which shouldn't be ignored), and understanding these should be part of your investment process.
If you're in the market for dividend stocks, we recommend checking our list of top 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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