Nu Skin Enterprises (NYSE:NUS) Is Increasing Its Dividend To US$0.39
Nu Skin Enterprises, Inc.'s (NYSE:NUS) dividend will be increasing to US$0.39 on 9th of March. This takes the dividend yield to 2.8%, which shareholders will be pleased with.
See our latest analysis for Nu Skin Enterprises
Nu Skin Enterprises' Dividend Is Well Covered By Earnings
If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Nu Skin Enterprises' dividend was only 52% of earnings, however it was paying out 105% of free cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.
Looking forward, earnings per share is forecast to rise by 42.8% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 37% by next year, which is in a pretty sustainable range.
Nu Skin Enterprises Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the first annual payment was US$0.54, compared to the most recent full-year payment of US$1.54. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.
Nu Skin Enterprises May Find It Hard To Grow The Dividend
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, Nu Skin Enterprises has only grown its earnings per share at 2.7% per annum over the past five years. Growth of 2.7% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.
Our Thoughts On Nu Skin Enterprises' Dividend
Overall, we always like to see the dividend being raised, but we don't think Nu Skin Enterprises will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Earnings growth generally bodes well for the future value of company dividend payments. See if the 5 Nu Skin Enterprises analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is Nu Skin Enterprises not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
