Here's What We Like About Navigator Company's (ELI:NVG) Upcoming Dividend

The Navigator Company, S.A. (ELI:NVG) stock is about to trade ex-dividend in 4 days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase Navigator Company's shares before the 27th of June in order to receive the dividend, which the company will pay on the 1st of July.

The company's upcoming dividend is €0.10545 a share, following on from the last 12 months, when the company distributed a total of €0.14 per share to shareholders. Looking at the last 12 months of distributions, Navigator Company has a trailing yield of approximately 4.3% on its current stock price of €3.296. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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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. That's why it's good to see Navigator Company paying out a modest 37% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out 80% 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 positive to see that Navigator Company's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

See our latest analysis for Navigator Company

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. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Navigator Company's earnings per share have been growing at 10% a year for the past 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. We're surprised that management has not elected to reinvest more in the business to accelerate growth further.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Navigator Company has seen its dividend decline 11% per annum on average over the past 10 years, which is not great to see. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.

The Bottom Line

Is Navigator Company worth buying for its dividend? Earnings per share have grown at a nice rate in recent times and over the last year, Navigator Company paid out less than half its earnings and a bit over half its free cash flow. Navigator Company looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

On that note, you'll want to research what risks Navigator Company is facing. In terms of investment risks, we've identified 2 warning signs with Navigator Company and understanding them should be part of your investment process.

If you're in the market for strong dividend payers, we recommend checking 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.