Nu Skin Enterprises (NYSE:NUS) Has Announced A Dividend Of $0.39

Nu Skin Enterprises, Inc. (NYSE:NUS) has announced that it will pay a dividend of $0.39 per share on the 6th of September. The dividend yield will be 5.9% based on this payment which is still above the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Nu Skin Enterprises' stock price has reduced by 32% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

View our latest analysis for Nu Skin Enterprises

Nu Skin Enterprises' Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, the company was paying out 110% of what it was earning. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Over the next year, EPS is forecast to expand by 102.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 57%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Nu Skin Enterprises Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.80 in 2013 to the most recent total annual payment of $1.56. This means that it has been growing its distributions at 6.9% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Dividend Has Limited Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. Nu Skin Enterprises' earnings per share has shrunk at 12% a year over the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. Although they have been consistent in the past, we think the payments are a little high to be sustained. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Nu Skin Enterprises (1 can't be ignored!) that you should be aware of before investing. Is Nu Skin Enterprises not quite the opportunity you were looking for? Why not check out 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.