Stock Analysis

Nu Skin Enterprises (NYSE:NUS) Will Pay A Larger Dividend Than Last Year At $0.39

  •  Updated
Source: Shutterstock

The board of Nu Skin Enterprises, Inc. (NYSE:NUS) has announced that it will be increasing its dividend by 1.3% on the 8th of March to $0.39, up from last year's comparable payment of $0.385. This makes the dividend yield 3.5%, which is above the industry average.

Check out our latest analysis for Nu Skin Enterprises

Nu Skin Enterprises' Payment Has Solid Earnings Coverage

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 making up a very large proportion of earnings and perhaps more concerning was that it was 155% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

Over the next year, EPS is forecast to expand by 45.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 51%, which is in the range that makes us comfortable with the sustainability of the dividend.

NYSE:NUS Historic Dividend February 19th 2023

Nu Skin Enterprises Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $0.80 in 2013, 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. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. In the last five years, Nu Skin Enterprises' earnings per share has shrunk at approximately 2.9% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

Our Thoughts On Nu Skin Enterprises' Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. 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. Is Nu Skin Enterprises not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Valuation is complex, but we're helping make it simple.

Find out whether Nu Skin Enterprises is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis