Newell Brands, Inc. (NASDAQ:NWL) is scheduled to trade ex-dividend within the next four days. The ex-dividend date is one business day before the company’s record date (the date the company determines which shareholders are eligible to receive the dividend). The ex-dividend date is important because the settlement process takes two full business days, so if you miss it, it won’t be recorded on the company’s books on the record date. In other words, investors can buy Newell Brands shares up until August 30th to be eligible to receive the dividend paid on September 13th.
The company’s next dividend will be US$0.07 per share, after paying a total of US$0.28 to shareholders last year. Looking at the last 12 months’ dividends, Newell Brands has a dividend yield of approximately 3.8% on the current share price of US$7.40. If you buy this business for its dividend, you need to know if Newell Brands’ dividends are reliable and sustainable, so you need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for Newell Brands
Dividends are usually paid from a company’s profits. If a company pays out more in dividends than it earns, the dividend may be unsustainable. Newell Brands paid a dividend last year despite not having a profit. This may be a one-off occurrence, but it’s not sustainable in the long term. Given the recent losses, it’s important to check whether the company generated enough cash to pay the dividend. If Newell Brands wasn’t generating enough cash to pay the dividend, it would have either paid it from cash in the bank or by borrowing money, neither of which are sustainable in the long term. Fortunately, dividend payments took up just 25% of the free cash flow it generated, which is a decent payout ratio.
Click here to see the company’s dividend payout ratio, plus analyst estimates of its future dividends.
Historical Dividend
Are profits and dividends increasing?
Stocks in companies with sustainable earnings growth often make the best dividend prospects, as they are more likely to raise dividends when profits are growing. Investors love dividends, so if earnings fall and the dividend is cut, you can expect a lot of selling of shares at the same time. Newell Brands was in the red last year, but the overall trend, at least, suggests that earnings have been improving over the past five years. Still, loss-making companies whose business doesn’t recover quickly are usually not good candidates for dividend investors.
Many investors assess a company’s dividend performance by evaluating how much the dividend has changed over time, and Newell Brands’ dividend has fallen by an average of 7.3% per year over the last decade, which is not a great situation.
Get our latest analysis on Newell Brands’ balance sheet health here.
Final conclusion
Should investors buy Newell Brands for its upcoming dividend? It’s hard to get used to Newell Brands paying a dividend despite reporting a loss over the past year. But at least the dividend was covered by free cash flow. Not a bad combination overall, but we feel there are likely more attractive dividend prospects out there.
With that in mind, Newell Brands’ dividend is attractive, but it’s worth knowing about the risks associated with this stock. For example, Newell Brands has 2 warning signs you should be aware of.
Generally speaking, we don’t recommend just buying the first dividend stock you see, so here we present a curated list of interesting stocks with high dividends.
Have something to say about this article? Do you have any questions about the content? Contact us directly or email us at editorial-team (at) simplywallst.com.
This article by Simply Wall St is of general nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology, and our articles are not intended as financial advice. It is not a recommendation to buy or sell stocks, and does not take into account your objectives or financial situation. We aim to provide long-term analysis driven by fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned herein.