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Interested In Nordstrom’s (NYSE:JWN) Upcoming US$0.19 Dividend? You Have Three


It looks like Nordstrom, Inc. (NYSE:JWN) is about to go ex-dividend in the next three 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 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. Therefore, if you purchase Nordstrom’s shares on or after the 28th of November, you won’t be eligible to receive the dividend, when it is paid on the 14th of December.

The company’s next dividend payment will be US$0.19 per share, and in the last 12 months, the company paid a total of US$0.76 per share. Based on the last year’s worth of payments, Nordstrom has a trailing yield of 3.5% on the current stock price of $21.69. 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.

Our analysis indicates that JWN is potentially undervalued!

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. Nordstrom has a low and conservative payout ratio of just 19% of its income after tax. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Fortunately, it paid out only 45% of its free cash flow in the past year.

It’s positive to see that Nordstrom’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 the company’s payout ratio, plus analyst estimates of its future dividends.

historic-dividend
NYSE:JWN Historic Dividend November 24th 2022

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. 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 not enthused to see that Nordstrom’s earnings per share have remained effectively flat over the past five years. We’d take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.

Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Nordstrom has seen its dividend decline 3.5% per annum on average over the past 10 years, which is not great to see.

Final Takeaway

Is Nordstrom an attractive dividend stock, or better left on the shelf? While it’s not great to see that earnings per share are effectively flat over the 10-year period we checked, at least the payout ratios are low and conservative. While it does have some good things going for it, we’re a bit ambivalent and it would take more to convince us of Nordstrom’s dividend merits.

So while Nordstrom looks good from a dividend perspective, it’s always worthwhile being up to date with the risks involved in this stock. For example – Nordstrom has 2 warning signs we think you should be aware of.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

Valuation is complex, but we’re helping make it simple.

Find out whether Nordstrom is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

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.



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