Yahoo Finance Why You Should Leave Numis Corporation Plc's (LON:NUM) Upcoming Dividend On The Shelf
It looks like Numis Corporation Plc (LON:NUM) is about to go ex-dividend in the next 4 days. Investors can purchase shares before the 21st of May in order to be eligible for this dividend, which will be paid on the 19th of June.
Numis's upcoming dividend is UK£0.055 a share, following on from the last 12 months, when the company distributed a total of UK£0.12 per share to shareholders. Calculating the last year's worth of payments shows that Numis has a trailing yield of 4.3% on the current share price of £2.815. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Numis has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for Numis
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Numis distributed an unsustainably high 127% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious.
When the dividend payout ratio is high, as it is in this case, the dividend is usually at greater risk of being cut in the future.
Click here to see how much of its profit Numis 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 earnings fall far enough, the company could be forced to cut its dividend. Numis's earnings per share have fallen at approximately 13% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Numis has delivered 4.1% dividend growth per year on average over the past ten years. The only way to pay higher dividends when earnings are shrinking is either to pay out a larger percentage of profits, spend cash from the balance sheet, or borrow the money. Numis is already paying out 127% of its profits, and with shrinking earnings we think it's unlikely that this dividend will grow quickly in the future.
Final Takeaway
Is Numis an attractive dividend stock, or better left on the shelf? Earnings per share are in decline and Numis is paying out what we feel is an uncomfortably high percentage of its profit as dividends. It's not that we hate the business, but we feel that these characeristics are not desirable for investors seeking a reliable dividend stock to own for the long term. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.
With that in mind though, if the poor dividend characteristics of Numis don't faze you, it's worth being mindful of the risks involved with this business. To help with this, we've discovered 4 warning signs for Numis (1 is a bit unpleasant!) that you ought to be aware of before buying the shares.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
