Three Days Left Until Norcros plc (LON:NXR) Trades Ex-Dividend
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Norcros plc (LON:NXR) is about to go ex-dividend in just three days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Norcros investors that purchase the stock on or after the 30th of November will not receive the dividend, which will be paid on the 16th of January.
The company's upcoming dividend is UK£0.034 a share, following on from the last 12 months, when the company distributed a total of UK£0.10 per share to shareholders. Looking at the last 12 months of distributions, Norcros has a trailing yield of approximately 6.3% on its current stock price of £1.62. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Check out our latest analysis for Norcros
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. Norcros paid out more than half (60%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Norcros generated enough free cash flow to afford its dividend. It distributed 31% of its free cash flow as dividends, a comfortable payout level for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Norcros, with earnings per share up 3.1% on average over the last five years. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Norcros has delivered an average of 8.3% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
The Bottom Line
Should investors buy Norcros for the upcoming dividend? Earnings per share growth has been modest and Norcros paid out over half of its profits and less than half of its free cash flow, although both payout ratios are within normal limits. To summarise, Norcros looks okay on this analysis, although it doesn't appear a stand-out opportunity.
So while Norcros looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Our analysis shows 2 warning signs for Norcros and you should be aware of these before buying any shares.
If you're in the market for strong dividend payers, we recommend checking 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.
