Dividend Investors: Don't Be Too Quick To Buy Navient Corporation (NASDAQ:NAVI) For Its Upcoming Dividend
Navient Corporation (NASDAQ:NAVI) stock is about to trade ex-dividend in four days. The ex-dividend date occurs one day before the record date, which is the day on which shareholders need to be on the company's books in order to receive a 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. Meaning, you will need to purchase Navient's shares before the 4th of September to receive the dividend, which will be paid on the 18th of September.
The company's next dividend payment will be US$0.16 per share, and in the last 12 months, the company paid a total of US$0.64 per share. Last year's total dividend payments show that Navient has a trailing yield of 6.8% on the current share price of US$9.46. 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! 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. Navient paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run.
View our latest analysis for Navient
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. Navient was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. It looks like the Navient dividends are largely the same as they were 10 years ago. If a company's dividend stays flat while earnings are in decline, this is typically a sign that it is paying out a larger percentage of its earnings. This can become unsustainable if earnings fall far enough.
Get our latest analysis on Navient's balance sheet health here.
To Sum It Up
Should investors buy Navient for the upcoming dividend? It's hard to get past the idea of Navient paying a dividend despite reporting a loss over the past year - especially when the general trend in its earnings also looks to be negative. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.
With that being said, if you're still considering Navient as an investment, you'll find it beneficial to know what risks this stock is facing. For example, we've found 2 warning signs for Navient (1 is potentially serious!) that deserve your attention before investing in the 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.