Is It Worth Considering Nelnet, Inc. (NYSE:NNI) For Its Upcoming 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 Nelnet, Inc. (NYSE:NNI) is about to go ex-dividend in just 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Nelnet investors that purchase the stock on or after the 30th of November will not receive the dividend, which will be paid on the 15th of December.
The company's next dividend payment will be US$0.28 per share, on the back of last year when the company paid a total of US$1.12 to shareholders. Looking at the last 12 months of distributions, Nelnet has a trailing yield of approximately 1.3% on its current stock price of $85.53. If you buy this business for its dividend, you should have an idea of whether Nelnet's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for Nelnet
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Nelnet paid out a comfortable 30% of its profit last year.
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.
Click here to see how much of its profit Nelnet paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's not ideal to see Nelnet's earnings per share have been shrinking at 3.3% a year over the previous five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Nelnet has delivered an average of 11% per year annual increase in its dividend, based on the past 10 years of dividend payments.
Final Takeaway
Is Nelnet an attractive dividend stock, or better left on the shelf? Earnings per share have shrunk noticeably in recent years, although we like that the company has a low payout ratio. This could suggest a cut to the dividend may not be a major risk in the near future. We think there are likely better opportunities out there.
However if you're still interested in Nelnet as a potential investment, you should definitely consider some of the risks involved with Nelnet. To that end, you should learn about the 2 warning signs we've spotted with Nelnet (including 1 which is a bit unpleasant).
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.
