Australia markets closed
  • ALL ORDS

    7,239.40
    +30.40 (+0.42%)
     
  • ASX 200

    7,014.20
    +31.50 (+0.45%)
     
  • AUD/USD

    0.7785
    +0.0055 (+0.71%)
     
  • OIL

    65.51
    +1.69 (+2.65%)
     
  • GOLD

    1,844.00
    +20.00 (+1.10%)
     
  • BTC-AUD

    61,946.56
    -2,277.27 (-3.55%)
     
  • CMC Crypto 200

    1,398.33
    +39.77 (+2.93%)
     
  • AUD/EUR

    0.6405
    +0.0011 (+0.17%)
     
  • AUD/NZD

    1.0724
    -0.0028 (-0.26%)
     
  • NZX 50

    12,367.86
    -60.26 (-0.48%)
     
  • NASDAQ

    13,393.12
    +283.97 (+2.17%)
     
  • FTSE

    7,043.61
    +80.28 (+1.15%)
     
  • Dow Jones

    34,382.13
    +360.68 (+1.06%)
     
  • DAX

    15,416.64
    +216.96 (+1.43%)
     
  • Hang Seng

    28,027.57
    +308.90 (+1.11%)
     
  • NIKKEI 225

    28,084.47
    +636.46 (+2.32%)
     

Dividend Investors: Don't Be Too Quick To Buy National Australia Bank Limited (ASX:NAB) For Its Upcoming Dividend

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
Simply Wall St
·4-min read
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

National Australia Bank Limited (ASX:NAB) is about to trade ex-dividend in the next four days. You will need to purchase shares before the 12th of November to receive the dividend, which will be paid on the 10th of December.

National Australia Bank's next dividend payment will be AU$0.30 per share, and in the last 12 months, the company paid a total of AU$0.60 per share. Last year's total dividend payments show that National Australia Bank has a trailing yield of 3.1% on the current share price of A$19.57. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for National Australia Bank

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. National Australia Bank is paying out an acceptable 53% of its profit, a common payout level among most companies.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're discomforted by National Australia Bank's 16% per annum decline in earnings in the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

National Australia Bank also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. National Australia Bank has seen its dividend decline 8.6% per annum on average over the past 10 years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

Final Takeaway

Is National Australia Bank an attractive dividend stock, or better left on the shelf? We're not overly enthused to see National Australia Bank's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.

So if you're still interested in National Australia Bank despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. Our analysis shows 2 warning signs for National Australia Bank and you should be aware of these before buying any shares.

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.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.