Do These 3 Checks Before Buying Nielsen Holdings plc (NYSE:NLSN) For Its Upcoming Dividend

By
Simply Wall St
Published
February 27, 2021
NYSE:NLSN

Nielsen Holdings plc (NYSE:NLSN) stock is about to trade ex-dividend in 3 days. Investors can purchase shares before the 3rd of March in order to be eligible for this dividend, which will be paid on the 18th of March.

Nielsen Holdings's next dividend payment will be US$0.06 per share, on the back of last year when the company paid a total of US$0.24 to shareholders. Looking at the last 12 months of distributions, Nielsen Holdings has a trailing yield of approximately 1.1% on its current stock price of $22.41. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Nielsen Holdings can afford its dividend, and if the dividend could grow.

See our latest analysis for Nielsen Holdings

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Nielsen Holdings reported a loss last year, so it's not great to see that it has continued paying a dividend. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If Nielsen Holdings didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. Luckily it paid out just 18% of its free cash flow last year.

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

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NYSE:NLSN Historic Dividend February 27th 2021

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. Nielsen Holdings was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Nielsen Holdings has seen its dividend decline 12% per annum on average over the past eight years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

We update our analysis on Nielsen Holdings every 24 hours, so you can always get the latest insights on its financial health, here.

Final Takeaway

Is Nielsen Holdings worth buying for its dividend? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Nielsen Holdings.

With that being said, if you're still considering Nielsen Holdings as an investment, you'll find it beneficial to know what risks this stock is facing. We've identified 2 warning signs with Nielsen Holdings (at least 1 which is significant), and understanding them should be part of your investment process.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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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