Four Days Left To Buy Nielsen Holdings plc (NYSE:NLSN) Before The Ex-Dividend Date

By
Simply Wall St
Published
August 12, 2021
NYSE:NLSN
Source: Shutterstock

Readers hoping to buy Nielsen Holdings plc (NYSE:NLSN) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase Nielsen Holdings' shares before the 18th of August in order to be eligible for the dividend, which will be paid on the 2nd of September.

The company's next dividend payment will be US$0.06 per share. Last year, in total, the company distributed US$0.24 to shareholders. Last year's total dividend payments show that Nielsen Holdings has a trailing yield of 1.0% on the current share price of $23.16. 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! We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Nielsen Holdings

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. It paid out 83% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be concerned if earnings began to decline. A useful secondary check can be to evaluate whether Nielsen Holdings generated enough free cash flow to afford its dividend. It paid out 18% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Nielsen Holdings'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.

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

historic-dividend
NYSE:NLSN Historic Dividend August 13th 2021

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Nielsen Holdings's earnings per share have fallen at approximately 29% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Nielsen Holdings has seen its dividend decline 10% per annum on average over the past nine 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.

The Bottom Line

From a dividend perspective, should investors buy or avoid Nielsen Holdings? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. In summary, while it has some positive characteristics, we're not inclined to race out and buy Nielsen Holdings today.

If you want to look further into Nielsen Holdings, it's worth knowing the risks this business faces. For example, Nielsen Holdings has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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