Yahoo Finance Is It Smart To Buy Navigator Holdings Ltd. (NYSE:NVGS) Before It Goes Ex-Dividend?
Navigator Holdings Ltd. (NYSE:NVGS) stock is about to trade ex-dividend in 3 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Accordingly, Navigator Holdings investors that purchase the stock on or after the 4th of June will not receive the dividend, which will be paid on the 25th of June.
The company's next dividend payment will be US$0.05 per share, and in the last 12 months, the company paid a total of US$0.20 per share. Based on the last year's worth of payments, Navigator Holdings stock has a trailing yield of around 1.1% on the current share price of US$17.63. 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 Navigator Holdings
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Navigator Holdings paid out just 17% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether Navigator Holdings generated enough free cash flow to afford its dividend. It paid out 5.4% of its free cash flow as dividends last year, which is conservatively low.
It's positive to see that Navigator Holdings's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Navigator Holdings's earnings have been skyrocketing, up 70% per annum for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Navigator Holdings looks like a promising growth company.
Unfortunately Navigator Holdings has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.
Final Takeaway
From a dividend perspective, should investors buy or avoid Navigator Holdings? We love that Navigator Holdings is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. Overall we think this is an attractive combination and worthy of further research.
So while Navigator Holdings looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Our analysis shows 1 warning sign for Navigator Holdings and you should be aware of it before buying any shares.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.
