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Nu Skin Enterprises, Inc. (NYSE:NUS) stock is about to trade ex-dividend in four days. You can purchase shares before the 27th of August in order to receive the dividend, which the company will pay on the 9th of September.
Nu Skin Enterprises's upcoming dividend is US$0.38 a share, following on from the last 12 months, when the company distributed a total of US$1.50 per share to shareholders. Based on the last year's worth of payments, Nu Skin Enterprises has a trailing yield of 3.2% on the current stock price of $47.56. If you buy this business for its dividend, you should have an idea of whether Nu Skin Enterprises's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
View 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 paid out more than half (56%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Nu Skin Enterprises generated enough free cash flow to afford its dividend. Fortunately, it paid out only 40% of its free cash flow in the past year.
It's positive to see that Nu Skin Enterprises's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
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 earnings fall far enough, the company could be forced to cut its dividend. So we're not too excited that Nu Skin Enterprises's earnings are down 3.5% a year over the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Nu Skin Enterprises has increased its dividend at approximately 13% a year on average. That's interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company's profits. This can be valuable for shareholders, but it can't go on forever.
The Bottom Line
Has Nu Skin Enterprises got what it takes to maintain its dividend payments? The payout ratios are within a reasonable range, implying the dividend may be sustainable. Declining earnings are a serious concern, however, and could pose a threat to the dividend in future. In summary, while it has some positive characteristics, we're not inclined to race out and buy Nu Skin Enterprises today.