What To Know Before Buying Newell Brands Inc (NYSE:NWL) For Its Dividend

There is a lot to be liked about Newell Brands Inc (NYSE:NWL) as an income stock. It has paid dividends over the past 10 years. The stock currently pays out a dividend yield of 4.9%, and has a market cap of US$8.9b. Should it have a place in your portfolio? Let’s take a look at Newell Brands in more detail.

View our latest analysis for Newell Brands

5 questions to ask before buying a dividend stock

When researching a dividend stock, I always follow the following screening criteria:

• Is its annual yield among the top 25% of dividend-paying companies?

• Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?

• Has the amount of dividend per share grown over the past?

• Does earnings amply cover its dividend payments?

• Will it be able to continue to payout at the current rate in the future?

NYSE:NWL Historical Dividend Yield October 8th 18

How well does Newell Brands fit our criteria?

The current trailing twelve-month payout ratio for the stock is 22%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 40%, leading to a dividend yield of 4.9%. However, EPS is forecasted to fall to $1.15 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.

When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.

Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.

In terms of its peers, Newell Brands generates a yield of 4.9%, which is high for Consumer Durables stocks.

Next Steps:

With these dividend metrics in mind, I definitely rank Newell Brands as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. Below, I’ve compiled three pertinent factors you should further research:

1. Future Outlook: What are well-informed industry analysts predicting for NWL’s future growth? Take a look at our free research report of analyst consensus for NWL’s outlook.

2. Valuation: What is NWL worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether NWL is currently mispriced by the market.

3. Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.