Yahoo Finance Is It Smart To Buy Norfolk Southern Corporation (NYSE:NSC) Before It Goes Ex-Dividend?
Norfolk Southern Corporation (NYSE:NSC) is about to trade ex-dividend in the next three days. The ex-dividend date is usually set to be one business day 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. 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. Thus, you can purchase Norfolk Southern's shares before the 3rd of November in order to receive the dividend, which the company will pay on the 21st of November.
The company's next dividend payment will be US$1.24 per share. Last year, in total, the company distributed US$4.96 to shareholders. Based on the last year's worth of payments, Norfolk Southern stock has a trailing yield of around 2.2% on the current share price of $229.14. 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! We need to see whether the dividend is covered by earnings and if it's growing.
View our latest analysis for Norfolk Southern
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Norfolk Southern paid out a comfortable 35% of its profit last year. A useful secondary check can be to evaluate whether Norfolk Southern generated enough free cash flow to afford its dividend. It distributed 43% of its free cash flow as dividends, a comfortable payout level 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 the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Norfolk Southern's earnings per share have risen 19% per annum over the last five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Norfolk Southern has delivered 10% dividend growth per year on average over the past 10 years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
Final Takeaway
Is Norfolk Southern worth buying for its dividend? Norfolk Southern has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. There's a lot to like about Norfolk Southern, and we would prioritise taking a closer look at it.
On that note, you'll want to research what risks Norfolk Southern is facing. To help with this, we've discovered 1 warning sign for Norfolk Southern that you should be aware of before investing in their shares.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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