Income Investors Should Know That National CineMedia, Inc. (NASDAQ:NCMI) Goes Ex-Dividend Soon

National CineMedia, Inc. (NASDAQ:NCMI) stock is about to trade ex-dividend in 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase National CineMedia's shares on or after the 10th of November will not receive the dividend, which will be paid on the 26th of November.

The company's upcoming dividend is US$0.03 a share, following on from the last 12 months, when the company distributed a total of US$0.12 per share to shareholders. Calculating the last year's worth of payments shows that National CineMedia has a trailing yield of 2.8% on the current share price of US$4.30. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether National CineMedia has been able to grow its dividends, or if the dividend might be cut.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. National CineMedia reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. It distributed 35% of its free cash flow as dividends, a comfortable payout level for most companies.

See our latest analysis for National CineMedia

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. National CineMedia was unprofitable last year, but at least the general trend suggests its earnings have been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. National CineMedia has seen its dividend decline 35% per annum on average over the past 10 years, which is not great to see.

Get our latest analysis on National CineMedia's balance sheet health here.

Final Takeaway

From a dividend perspective, should investors buy or avoid National CineMedia? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. In summary, it's hard to get excited about National CineMedia from a dividend perspective.

In light of that, while National CineMedia has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 2 warning signs for National CineMedia and you should be aware of them before buying any shares.

If you're in the market for strong dividend payers, we recommend checking 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.