Yahoo Finance Don't Buy Next Fifteen Communications Group plc (LON:NFC) For Its Next Dividend Without Doing These Checks
Readers hoping to buy Next Fifteen Communications Group plc (LON:NFC) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Meaning, you will need to purchase Next Fifteen Communications Group's shares before the 27th of October to receive the dividend, which will be paid on the 25th of November.
The company's next dividend payment will be UK£0.045 per share. Last year, in total, the company distributed UK£0.13 to shareholders. Based on the last year's worth of payments, Next Fifteen Communications Group has a trailing yield of 1.5% on the current stock price of £8.46. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
View our latest analysis for Next Fifteen Communications 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. Next Fifteen Communications Group reported a loss last year, so it's not great to see that it has continued paying a dividend. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If Next Fifteen Communications Group didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. It paid out 18% of its free cash flow as dividends last year, which is conservatively low.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Next Fifteen Communications Group reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.
Next Fifteen Communications Group also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Next Fifteen Communications Group has increased its dividend at approximately 19% a year on average.
Get our latest analysis on Next Fifteen Communications Group's balance sheet health here.
The Bottom Line
Has Next Fifteen Communications Group got what it takes to maintain its dividend payments? It's hard to get used to Next Fifteen Communications Group paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Next Fifteen Communications Group.
Although, if you're still interested in Next Fifteen Communications Group and want to know more, you'll find it very useful to know what risks this stock faces. Our analysis shows 1 warning sign for Next Fifteen Communications Group and you should be aware of it before buying any shares.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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