Readers hoping to buy Nielsen Holdings plc (NYSE:NLSN) 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 21st of August in order to receive the dividend, which the company will pay on the 5th of September.
Nielsen Holdings's next dividend payment will be US$0.35 per share. Last year, in total, the company distributed US$1.40 to shareholders. Calculating the last year's worth of payments shows that Nielsen Holdings has a trailing yield of 6.9% on the current share price of $20.23. If you buy this business for its dividend, you should have an idea of whether Nielsen Holdings's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
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. Nielsen Holdings reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. It paid out 81% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Nielsen Holdings reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Nielsen Holdings has delivered 12% dividend growth per year on average over the past 7 years.
We update our analysis on Nielsen Holdings every 24 hours, so you can always get the latest insights on its financial health, here.
Is Nielsen Holdings worth buying for its dividend? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.
Ever wonder what the future holds for Nielsen Holdings? See what the 14 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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.
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If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.