It looks like National Research Corporation (NASDAQ:NRC) is about to go ex-dividend in the next 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase National Research's shares on or after the 15th of September will not receive the dividend, which will be paid on the 22nd of September.
The upcoming dividend for National Research will put a total of US$1.00 per share in shareholders' pockets, up from last year's total dividends of US$0.48. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether National Research can afford its dividend, and if the dividend could grow.
View our latest analysis for National Research
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. National Research paid out 51% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether National Research generated enough free cash flow to afford its dividend. It paid out 84% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.
It's positive to see that National Research'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 how much of its profit National Research paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. 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 encouraged by the steady growth at National Research, with earnings per share up 4.8% on average over the last five years. A high payout ratio of 51% generally happens when a company can't find better uses for the cash. Combined with slim earnings growth in the past few years, National Research could be signalling that its future growth prospects are thin.