Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see nib holdings limited (ASX:NHF) is about to trade ex-dividend in the next 4 days. Ex-dividend means that investors that purchase the stock on or after the 27th of August will not receive this dividend, which will be paid on the 30th of September.
nib holdings's upcoming dividend is AU$0.13 a share, following on from the last 12 months, when the company distributed a total of AU$0.23 per share to shareholders. Last year's total dividend payments show that nib holdings has a trailing yield of 3.2% on the current share price of A$7.09. 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 nib holdings has been able to grow its dividends, or if the dividend might be cut.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. nib holdings paid out 70% of its earnings to investors last year, a normal payout level for most businesses.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
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 earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, nib holdings's earnings per share have been growing at 16% a year for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, nib holdings has lifted its dividend by approximately 27% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
The Bottom Line
Should investors buy nib holdings for the upcoming dividend? Earnings per share are growing at an attractive rate, and nib holdings is paying out a bit over half its profits. In summary, nib holdings appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
Wondering what the future holds for nib holdings? See what the eight analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.