NZME's (NZSE:NZM) Dividend Will Be NZ$0.0353

NZME Limited (NZSE:NZM) has announced that it will pay a dividend of NZ$0.0353 per share on the 27th of September. The dividend yield will be 7.5% based on this payment which is still above the industry average.

Check out our latest analysis for NZME

NZME's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite easily covered by NZME's earnings. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 11.8% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 68%, which is in the range that makes us comfortable with the sustainability of the dividend.

NZME's Dividend Has Lacked Consistency

It's comforting to see that NZME has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The dividend has gone from an annual total of NZ$0.07 in 2016 to the most recent total annual payment of NZ$0.10. This implies that the company grew its distributions at a yearly rate of about 6.1% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. NZME has seen EPS rising for the last five years, at 12% per annum. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

We Really Like NZME's Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 identified 3 warning signs for NZME (1 shouldn't be ignored!) that you should be aware of before investing. Is NZME not quite the opportunity you were looking for? Why not check out our selection of top 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.