Readers hoping to buy Nine Entertainment Co. Holdings Limited (ASX:NEC) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be two business days 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 important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company’s books on the record date. Meaning, you will need to purchase Nine Entertainment Holdings’ shares before the 11th of September to receive the dividend, which will be paid on the 26th of September.
The company’s next dividend payment will be AU$0.53 per share, and in the last 12 months, the company paid a total of AU$0.075 per share. Based on the last year’s worth of payments, Nine Entertainment Holdings has a trailing yield of 4.4% on the current stock price of AU$1.705. If you buy this business for its dividend, you should have an idea of whether Nine Entertainment Holdings’s dividend is reliable and sustainable. As a result, readers should always check whether Nine Entertainment Holdings has been able to grow its dividends, or if the dividend might be cut.
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. Nine Entertainment Holdings distributed an unsustainably high 114% of its profit as dividends to shareholders last year. Without extenuating circumstances, we’d consider the dividend at risk of a cut. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out more than half (52%) of its free cash flow in the past year, which is within an average range for most companies.
It’s disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and Nine Entertainment Holdings fortunately did generate enough cash to fund its dividend. If executives were to continue paying more in dividends than the company reported in profits, we’d view this as a warning sign. Very few companies are able to sustainably pay dividends larger than their reported earnings.
‘ The preceding article may include information circulated by third parties ’
‘ Some details of this article were extracted from the following source uk.finance.yahoo.com ’
