Readers hoping to buy NL Industries, Inc. (NYSE:NL) 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 2nd of March in order to receive the dividend, which the company will pay on the 17th of March.
NL Industries's next dividend payment will be US$0.04 per share, on the back of last year when the company paid a total of US$0.16 to shareholders. Looking at the last 12 months of distributions, NL Industries has a trailing yield of approximately 4.9% on its current stock price of $3.27. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, NL Industries's earnings per share have been growing at 13% a year for the past five years. NL Industries is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. This is a reasonable combination that could hint at some further dividend increases in the future.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. NL Industries has seen its dividend decline 11% per annum on average over the past ten years, which is not great to see. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.
Is NL Industries worth buying for its dividend? Companies like NL Industries that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Overall, NL Industries looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
Want to learn more about NL Industries's dividend performance? Check out this visualisation of its historical revenue and earnings growth.
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.
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