NZX (NZSE:NZX) Has Affirmed Its Dividend Of NZ$0.0365

The board of NZX Limited (NZSE:NZX) has announced that it will pay a dividend on the 28th of March, with investors receiving NZ$0.0365 per share. This means the annual payment is 6.0% of the current stock price, which is above the average for the industry.

Check out our latest analysis for NZX

NZX Is Paying Out More Than It Is Earning

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, the dividend made up 88% of cash flows, but a higher proportion of net income. The company could be more focused on returning cash to shareholders, but this could indicate that growth opportunities are few and far between.

Over the next year, EPS is forecast to expand by 63.3%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 106% over the next year.

NZX Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the annual payment back then was NZ$0.056, compared to the most recent full-year payment of NZ$0.061. Its dividends have grown at less than 1% per annum over this time frame. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

NZX May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. NZX has seen earnings per share falling at 3.8% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

NZX's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for NZX that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.