It Might Not Be A Great Idea To Buy The National Security Group, Inc. (NASDAQ:NSEC) For Its Next Dividend

By
Simply Wall St
Published
February 01, 2021
NasdaqGM:NSEC

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that The National Security Group, Inc. (NASDAQ:NSEC) is about to go ex-dividend in just three days. You will need to purchase shares before the 5th of February to receive the dividend, which will be paid on the 26th of February.

National Security Group's next dividend payment will be US$0.06 per share, and in the last 12 months, the company paid a total of US$0.24 per share. Last year's total dividend payments show that National Security Group has a trailing yield of 2.1% on the current share price of $11.42. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for National Security Group

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. National Security Group paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run.

Click here to see how much of its profit National Security Group paid out over the last 12 months.

historic-dividend
NasdaqGM:NSEC Historic Dividend February 1st 2021

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. National Security Group was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. National Security Group's dividend payments per share have declined at 8.8% per year on average over the past 10 years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

We update our analysis on National Security Group every 24 hours, so you can always get the latest insights on its financial health, here.

The Bottom Line

From a dividend perspective, should investors buy or avoid National Security Group? It's hard to get past the idea of National Security Group paying a dividend despite reporting a loss over the past year - especially when the general trend in its earnings also looks to be negative. National Security Group doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.

With that in mind though, if the poor dividend characteristics of National Security Group don't faze you, it's worth being mindful of the risks involved with this business. To help with this, we've discovered 3 warning signs for National Security Group (1 is a bit concerning!) that you ought to be aware of before buying the shares.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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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