Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see Nasdaq, Inc. (NASDAQ:NDAQ) is about to trade ex-dividend in the next four days. This means that investors who purchase shares on or after the 11th of March will not receive the dividend, which will be paid on the 26th of March.
Nasdaq‘s next dividend payment will be US$0.49 per share. Last year, in total, the company distributed US$1.96 to shareholders. Last year’s total dividend payments show that Nasdaq has a trailing yield of 1.4% on the current share price of $144.7. 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! So we need to investigate whether Nasdaq can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Nasdaq
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Nasdaq paid out a comfortable 34% of its profit last year.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we’re glad to see Nasdaq‘s earnings per share have risen 17% per annum over the last five years.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. Nasdaq has delivered 16% dividend growth per year on average over the past nine years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Has Nasdaq got what it takes to maintain its dividend payments? When companies are growing rapidly and retaining a majority of the profits within the business, it’s usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. Perhaps even more importantly – this can sometimes signal management is focused on the long term future of the business. Overall, Nasdaq looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
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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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. 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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