Is It Smart To Buy Nasdaq, Inc. (NASDAQ:NDAQ) Before It Goes Ex-Dividend?
Readers hoping to buy Nasdaq, Inc. (NASDAQ:NDAQ) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Investors can purchase shares before the 3rd of December in order to be eligible for this dividend, which will be paid on the 18th of December.
Nasdaq's upcoming dividend is US$0.49 a share, following on from the last 12 months, when the company distributed a total of US$1.96 per share to shareholders. Looking at the last 12 months of distributions, Nasdaq has a trailing yield of approximately 1.5% on its current stock price of $127.12. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Nasdaq has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Nasdaq
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. That's why it's good to see Nasdaq paying out a modest 35% of its earnings.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Nasdaq's earnings per share have been growing at 18% a year for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Nasdaq has delivered 16% dividend growth per year on average over the past nine years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
To Sum It Up
Has Nasdaq got what it takes to maintain its dividend payments? Companies like Nasdaq that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Nasdaq ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
In light of that, while Nasdaq has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 2 warning signs for Nasdaq and you should be aware of them before buying any shares.
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.
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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