Yahoo Finance NL Industries, Inc. (NYSE:NL) Will Pay A US$0.06 Dividend In Three Days
Readers hoping to buy NL Industries, Inc. (NYSE:NL) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase NL Industries' shares on or after the 4th of June will not receive the dividend, which will be paid on the 22nd 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. Last year's total dividend payments show that NL Industries has a trailing yield of 3.3% on the current share price of $7.24. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
View our latest analysis for NL Industries
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. That's why it's good to see NL Industries paying out a modest 34% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out more than half (56%) of its free cash flow in the past year, which is within an average range for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see how much of its profit NL Industries paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's not ideal to see NL Industries's earnings per share have been shrinking at 4.7% a year over the previous five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. NL Industries has seen its dividend decline 7.1% 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.
Final Takeaway
Is NL Industries worth buying for its dividend? Earnings per share have fallen significantly, although at least NL Industries paid out less than half of its profits and free cash flow over the last year, leaving some margin of safety. In summary, it's hard to get excited about NL Industries from a dividend perspective.
With that being said, if dividends aren't your biggest concern with NL Industries, you should know about the other risks facing this business. Every company has risks, and we've spotted 3 warning signs for NL Industries you should know about.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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.
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