Yahoo Finance NL Industries, Inc. (NYSE:NL) Is About To Go Ex-Dividend, And It Pays A 4.6% Yield
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see NL Industries, Inc. (NYSE:NL) is about to trade ex-dividend in the next 4 days. You can purchase shares before the 31st of August in order to receive the dividend, which the company will pay on the 15th of September.
NL Industries's next dividend payment will be US$0.04 per share, and in the last 12 months, the company paid a total of US$0.16 per share. Calculating the last year's worth of payments shows that NL Industries has a trailing yield of 4.6% on the current share price of $3.46. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for NL Industries
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. Fortunately NL Industries's payout ratio is modest, at just 35% of profit. A useful secondary check can be to evaluate whether NL Industries generated enough free cash flow to afford its dividend. The good news is it paid out just 22% of its free cash flow in the last year.
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?
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. Readers will understand then, why we're concerned to see NL Industries's earnings per share have dropped 17% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. NL Industries's dividend payments per share have declined at 11% per year on average over the past 10 years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.
Final Takeaway
Is NL Industries an attractive dividend stock, or better left on the shelf? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. All things considered, we are not particularly enthused about NL Industries from a dividend perspective.
In light of that, while NL Industries has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 2 warning signs for NL Industries that you should be aware of before investing in their shares.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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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