Nasdaq, Inc. (NASDAQ:NDAQ) Looks Interesting, And It's About To Pay A Dividend
Readers hoping to buy Nasdaq, Inc. (NASDAQ:NDAQ) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be one business day before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least one business day to settle. This means that investors who purchase Nasdaq's shares on or after the 11th of September will not receive the dividend, which will be paid on the 25th of September.
The company's upcoming dividend is US$0.31 a share, following on from the last 12 months, when the company distributed a total of US$1.24 per share to shareholders. Calculating the last year's worth of payments shows that Nasdaq has a trailing yield of 1.3% on the current share price of US$96.88. 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.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Nasdaq paying out a modest 32% of its earnings.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
View our latest analysis for Nasdaq
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. Fortunately for readers, Nasdaq's earnings per share have been growing at 13% a year for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Nasdaq has lifted its dividend by approximately 14% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
The Bottom Line
Has Nasdaq got what it takes to maintain its dividend payments? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Overall, Nasdaq looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
So while Nasdaq looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Our analysis shows 2 warning signs for Nasdaq and you should be aware of them before buying any shares.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.