Nu Skin Enterprises, Inc. (NYSE:NUS) will pay a dividend of $0.385 on the 7th of September. This makes the dividend yield 3.6%, which will augment investor returns quite nicely.
Nu Skin Enterprises' Dividend Is Well Covered By Earnings
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Nu Skin Enterprises' dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
Looking forward, earnings per share is forecast to rise by 92.3% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 36% by next year, which is in a pretty sustainable range.
Nu Skin Enterprises Has A Solid Track Record
The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $0.80 in 2012, and the most recent fiscal year payment was $1.54. This means that it has been growing its distributions at 6.8% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
Dividend Growth Is Doubtful
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. It's not great to see that Nu Skin Enterprises' earnings per share has fallen at approximately 5.9% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.
In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for Nu Skin Enterprises that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
What are the risks and opportunities for Nu Skin Enterprises?
Trading at 26% below our estimate of its fair value
Earnings are forecast to grow 26.79% per year
Significant insider selling over the past 3 months
Large one-off items impacting financial results
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