Income investors should know that NZME Limited (NZSE: NZM) is going ex-dividend soon
Regular readers will know we love our dividends at Simply Wall St, which is why it’s exciting to see NZME Limited (NZSE: NZM) is set to trade off dividend within the next four days. The ex-dividend date is generally set at one working day before the registration date which is the deadline by which you must be present in the books of the company as a shareholder to receive the dividend. The ex-dividend date is important because every time a stock is bought or sold, the transaction takes at least two business days to settle. Therefore, if you buy NZME shares on or after September 9, you will not be able to receive the dividend when it is paid on September 22.
The company’s next dividend payment will be NZ $ 0.035 per share, compared to last year when the company paid a total of NZ $ 0.06 to shareholders. Calculation of the value of last year’s payouts shows that NZME has a sliding 6.1% return on the current share price of NZ $ 0.98. Dividends are an important source of income for many shareholders, but the health of the business is critical to sustaining those dividends. You have to see if the dividend is covered by profits and if it increases.
See our latest review for NZME
Dividends are generally paid out of company profits. If a company pays more dividends than it made a profit, then the dividend could be unsustainable. That’s why it’s good to see NZME donate a modest 35% of its profits.
Click here to see how much of its profits NZME has paid in the past 12 months.
Have profits and dividends increased?
When profits fall, dividend companies become much more difficult to analyze and to safely own. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold massively at the same time. NZME’s earnings per share have fallen about 8.9% per year over the past five years. When earnings per share decrease, the maximum amount of dividends that can be paid also decreases.
Most investors will primarily assess a company’s dividend prospects by checking the historical rate of dividend growth. NZME has seen its dividend fall by 3.0% per year on average over the past five years, which is not great to see. It’s never nice to watch profits and dividends plummet, but at least management has reduced the dividend rather than potentially risking the health of the company in an attempt to maintain it.
Does NZME have what it takes to maintain its dividend payments? NZME’s earnings per share have been declining over the past five years, although it has the cushion of a low payout ratio, which suggests that a dividend cut is relatively unlikely. In summary, the NZME looks promising as a dividend-paying stock, and we suggest you take a closer look.
So while NZME looks good from a dividend standpoint, it’s still worth being aware of the risks involved in this title. For example, we found 3 warning signs for NZME which we recommend that you consider before investing in the business.
If you are in the dividend-paying stock market, we recommend that you check out our list of the highest dividend-paying stocks with a yield above 2% and a future dividend.
When trading stocks or any other investment, use the platform considered by many to be the gateway for professionals to the global market, Interactive Brokers. You get the cheapest * trading on stocks, options, futures, forex, bonds and funds from around the world from a single integrated account. Promoted
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.
*Interactive Brokers Ranked Least Expensive Broker By StockBrokers.com Online Annual Review 2020
Do you have any feedback on this item? Are you worried about the content? Get in touch with us directly. You can also send an email to the editorial team (at) simplywallst.com.