Nine Entertainment Co. Holdings Limited (ASX:NEC) Pays A AU$0.05 Dividend In Just Four Days

It looks like Nine Entertainment Co. Holdings Limited (ASX:NEC) is about to go ex-dividend in the next four days. Ex-dividend means that investors that purchase the stock on or after the 4th of March will not receive this dividend, which will be paid on the 20th of April.

Nine Entertainment Holdings's next dividend payment will be AU$0.05 per share, and in the last 12 months, the company paid a total of AU$0.07 per share. Looking at the last 12 months of distributions, Nine Entertainment Holdings has a trailing yield of approximately 2.4% on its current stock price of A$2.87. If you buy this business for its dividend, you should have an idea of whether Nine Entertainment Holdings's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Nine Entertainment 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. Nine Entertainment Holdings's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the 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. Fortunately, it paid out only 33% of its free cash flow in the past year.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Nine Entertainment Holdings was unprofitable last year, but at least the general trend suggests its earnings have been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Nine Entertainment Holdings has delivered an average of 7.6% per year annual increase in its dividend, based on the past seven years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Remember, you can always get a snapshot of Nine Entertainment Holdings's financial health, by checking our visualisation of its financial health, here.

The Bottom Line

Is Nine Entertainment Holdings an attractive dividend stock, or better left on the shelf? It's hard to get used to Nine Entertainment Holdings paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To help with this, we've discovered 1 warning sign for Nine Entertainment Holdings that you should be aware of before investing in their shares.

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.

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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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