Newell Brands Inc. (NASDAQ:NWL) is about to trade ex-dividend in the next 4 days. This means that investors who purchase shares on or after the 29th of August will not receive the dividend, which will be paid on the 13th of September.
Newell Brands’s next dividend payment will be US$0.23 per share, and in the last 12 months, the company paid a total of US$0.92 per share. Last year’s total dividend payments show that Newell Brands has a trailing yield of 5.8% on the current share price of $15.76. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Newell Brands can afford its dividend, and if the dividend could grow.
View our latest analysis for Newell Brands
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. Newell Brands reported a loss last year, so it’s not great to see that it has continued paying a dividend. With the recent loss, it’s important to check if the business generated enough cash to pay its dividend. If cash earnings don’t cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Over the last year it paid out 53% of its free cash flow as dividends, within the usual range for most companies.
Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Newell Brands reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Newell Brands has lifted its dividend by approximately 0.9% a year on average.
Get our latest analysis on Newell Brands’s balance sheet health here.
Final Takeaway
Should investors buy Newell Brands for the upcoming dividend? First, it’s not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow. It’s not that we think Newell Brands is a bad company, but these characteristics don’t generally lead to outstanding dividend performance.
Ever wonder what the future holds for Newell Brands? See what the 11 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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.
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.
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. Thank you for reading.