Yahoo Finance It Might Not Be A Great Idea To Buy Nu Skin Enterprises, Inc. (NYSE:NUS) For Its Next Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Nu Skin Enterprises, Inc. (NYSE:NUS) is about to trade ex-dividend in the next four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. Meaning, you will need to purchase Nu Skin Enterprises' shares before the 31st of May to receive the dividend, which will be paid on the 12th of June.
The company's upcoming dividend is US$0.06 a share, following on from the last 12 months, when the company distributed a total of US$0.24 per share to shareholders. Looking at the last 12 months of distributions, Nu Skin Enterprises has a trailing yield of approximately 1.8% on its current stock price of US$13.24. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Nu Skin Enterprises can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Nu Skin Enterprises
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. Nu Skin Enterprises reported a loss last year, so it's not great to see that it has continued paying a dividend. With the recent loss, it's important to check if the business generated enough cash to pay its 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. Dividends consumed 72% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. Nu Skin Enterprises 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.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Nu Skin Enterprises has seen its dividend decline 15% per annum on average over the past 10 years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.
We update our analysis on Nu Skin Enterprises every 24 hours, so you can always get the latest insights on its financial health, here.
Final Takeaway
Is Nu Skin Enterprises an attractive dividend stock, or better left on the shelf? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." It's not that we think Nu Skin Enterprises is a bad company, but these characteristics don't generally lead to outstanding dividend performance.
Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Nu Skin Enterprises. In terms of investment risks, we've identified 1 warning sign with Nu Skin Enterprises and understanding them should be part of your investment process.
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.
