Nexstar Media Group (NASDAQ:NXST) Will Pay A Larger Dividend Than Last Year At $1.35

Nexstar Media Group, Inc. (NASDAQ:NXST) has announced that it will be increasing its periodic dividend on the 24th of February to $1.35, which will be 50% higher than last year's comparable payment amount of $0.90. This takes the annual payment to 1.8% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for Nexstar Media Group

Nexstar Media Group's Earnings Easily Cover The Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before making this announcement, Nexstar Media Group was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to fall by 1.6% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 18%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Nexstar Media Group Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2013, the annual payment back then was $0.48, compared to the most recent full-year payment of $3.60. This works out to be a compound annual growth rate (CAGR) of approximately 22% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Nexstar Media Group has impressed us by growing EPS at 58% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like Nexstar Media Group's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 2 warning signs for Nexstar Media Group that investors should know about before committing capital to this stock. Is Nexstar Media Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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