Four Days Left Until NRW Holdings Limited (ASX:NWH) Trades Ex-Dividend

It looks like NRW Holdings Limited (ASX:NWH) is about to go ex-dividend in the next four days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, NRW Holdings investors that purchase the stock on or after the 25th of March will not receive the dividend, which will be paid on the 11th of April.

The company's next dividend payment will be AU$0.065 per share, and in the last 12 months, the company paid a total of AU$0.14 per share. Based on the last year's worth of payments, NRW Holdings has a trailing yield of 4.8% on the current stock price of AU$3.00. If you buy this business for its dividend, you should have an idea of whether NRW Holdings's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for NRW Holdings

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. NRW Holdings paid out more than half (74%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out 77% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

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?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see NRW Holdings's earnings per share have risen 11% per annum over the last five years. The company paid out most of its earnings as dividends over the last year, even though business is booming and earnings per share are growing rapidly. Higher earnings generally bode well for growing dividends, although with seemingly strong growth prospects we'd wonder why management are not reinvesting more in the business.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, NRW Holdings has increased its dividend at approximately 1.1% a year on average. Earnings per share have been growing much quicker than dividends, potentially because NRW Holdings is keeping back more of its profits to grow the business.

Final Takeaway

Has NRW Holdings got what it takes to maintain its dividend payments? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. That's why we're glad to see NRW Holdings's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 74% and 77% respectively. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

On that note, you'll want to research what risks NRW Holdings is facing. Every company has risks, and we've spotted 1 warning sign for NRW Holdings you should know about.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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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.