NIKE, Inc. (NYSE:NKE) stock is about to trade ex-dividend in 4 days time. Ex-dividend means that investors that purchase the stock on or after the 30th of August will not receive this dividend, which will be paid on the 30th of September.
NIKE's next dividend payment will be US$0.22 per share, and in the last 12 months, the company paid a total of US$0.88 per share. Calculating the last year's worth of payments shows that NIKE has a trailing yield of 1.1% on the current share price of $80.44. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether NIKE has been able to grow its dividends, or if the dividend might be cut.
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. That's why it's good to see NIKE paying out a modest 34% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Fortunately, it paid out only 28% of its free cash flow in the past year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
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 fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see NIKE's earnings per share have risen 11% per annum over the last five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, NIKE has lifted its dividend by approximately 13% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Is NIKE an attractive dividend stock, or better left on the shelf? NIKE has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past ten years, but the conservative payout ratio makes the current dividend look sustainable. Overall we think this is an attractive combination and worthy of further research.
Ever wonder what the future holds for NIKE? See what the 28 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.