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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Navient Corporation (NASDAQ:NAVI) is about to trade ex-dividend in the next 4 days. You will need to purchase shares before the 3rd of September to receive the dividend, which will be paid on the 18th of September.
Navient's next dividend payment will be US$0.16 per share. Last year, in total, the company distributed US$0.64 to shareholders. Last year's total dividend payments show that Navient has a trailing yield of 6.9% on the current share price of $9.31. If you buy this business for its dividend, you should have an idea of whether Navient's dividend is reliable and sustainable. As a result, readers should always check whether Navient has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Navient
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Navient paid out a comfortable 40% 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 the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Navient's earnings per share have fallen at approximately 10.0% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, nine years ago, Navient has lifted its dividend by approximately 5.4% a year on average.
To Sum It Up
Is Navient worth buying for its dividend? 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.
If you want to look further into Navient, it's worth knowing the risks this business faces. To that end, you should learn about the 3 warning signs we've spotted with Navient (including 1 which is significant).