Nu Skin Enterprises, Inc. (NYSE:NUS) Pays A US$0.38 Dividend In Just Four Days

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Nu Skin Enterprises, Inc. (NYSE:NUS) is about to trade ex-dividend in the next four days. If you purchase the stock on or after the 25th of November, you won't be eligible to receive this dividend, when it is paid on the 9th of December.

Nu Skin Enterprises's upcoming dividend is US$0.38 a share, following on from the last 12 months, when the company distributed a total of US$1.50 per share to shareholders. Calculating the last year's worth of payments shows that Nu Skin Enterprises has a trailing yield of 2.9% on the current share price of $51.34. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Nu Skin Enterprises

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Nu Skin Enterprises paid out 51% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Thankfully its dividend payments took up just 29% of the free cash flow it generated, which is a comfortable payout ratio.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. It's not encouraging to see that Nu Skin Enterprises's earnings are effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Nu Skin Enterprises has delivered an average of 12% per year annual increase in its dividend, based on the past 10 years of dividend payments.

Final Takeaway

Should investors buy Nu Skin Enterprises for the upcoming dividend? We're not enthused by the flat earnings per share, although at least the company's payout ratio is within reasonable bounds. Additionally, it paid out a lower percentage of its free cash flow, so at least it generated more cash than it spent on dividends. In summary, while it has some positive characteristics, we're not inclined to race out and buy Nu Skin Enterprises today.

So if you want to do more digging on Nu Skin Enterprises, you'll find it worthwhile knowing the risks that this stock faces. To help with this, we've discovered 1 warning sign for Nu Skin Enterprises that you should be aware of before investing in their shares.

If you're in the market for dividend stocks, we recommend checking our list of top 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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