Nu Skin Enterprises, Inc. (NYSE:NUS) will pay a dividend of $0.385 on the 7th of September. This means the annual payment is 3.6% of the current stock price, which is above the average for the industry.
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. Based on the last payment, Nu Skin Enterprises was quite comfortably earning enough to cover the dividend. 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. If the dividend continues on this path, the payout ratio could be 36% by next year, which we think can be pretty sustainable going forward.
Nu Skin Enterprises Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was $0.80 in 2012, and the most recent fiscal year payment was $1.54. This implies that the company grew its distributions at a yearly rate of about 6.8% over that duration. 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. However, initial appearances might be deceiving. In the last five years, Nu Skin Enterprises' earnings per share has shrunk at approximately 5.9% per annum. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.
Overall, a consistent dividend is a good thing, and we think that Nu Skin Enterprises has the ability to continue this into 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 payment isn't stellar, but it could make a decent addition to a dividend portfolio.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for Nu Skin Enterprises that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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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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.