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The board of Nexus Infrastructure plc (LON:NEXS) has announced that it will pay a dividend of £0.01 per share on the 27th of June. Including this payment, the dividend yield on the stock will be 1.8%, which is a modest boost for shareholders' returns.
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Nexus Infrastructure Might Find It Hard To Continue The Dividend
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Nexus Infrastructure is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.
Over the next year, EPS could expand by 5.6% if recent trends continue. While it is good to see income moving in the right direction, it still looks like the company won't achieve profitability. The healthy cash flows are definitely as good sign, though so we wouldn't panic just yet, especially with the earnings growing.
See our latest analysis for Nexus Infrastructure
Nexus Infrastructure's Dividend Has Lacked Consistency
Nexus Infrastructure has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2017, the annual payment back then was £0.042, compared to the most recent full-year payment of £0.03. Doing the maths, this is a decline of about 4.1% per year. A company that decreases its dividend over time generally isn't what we are looking for.
Nexus Infrastructure Could Grow Its Dividend
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that Nexus Infrastructure has been growing its earnings per share at 5.6% a year over the past five years. Even though the company isn't making a profit, strong earnings growth could turn that around in the near future. As long as the company becomes profitable soon, it is on a trajectory that could see it being a solid dividend payer.
In Summary
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.