Is it smart to buy Navient Corporation (NASDAQ: NAVI) before it becomes ex-dividend?
Regular readers will know we love our dividends at Simply Wall St, which is why it’s exciting to see Navient Corporation (NASDAQ: NAVI) is set to trade ex-dividend within the next four days. The ex-dividend date is a business day before a company’s registration date, which is the date the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important because the settlement process involves two full business days. So if you miss this date, you would not appear on the company’s books on the date of registration. In other words, investors can buy Navient shares before June 3 in order to be eligible for the dividend, which will be paid on June 18.
The company’s next dividend payment will be $ 0.16 per share, following last year when the company paid a total of $ 0.64 to shareholders. Based on the value of last year’s payouts, the Navient stock has a trailing yield of around 3.5% over the current stock price of $ 18.27. Dividends make a large contribution to investment returns for long-term holders, but only if the dividend continues to be paid. We need to see if the dividend is covered by profits and if it increases.
Check out our latest analysis for Navient
If a company pays more in dividends than it has earned, then the dividend can become unsustainable – hardly an ideal situation. Navient has a low and conservative payout ratio of just 14% of its after-tax income.
Generally speaking, the lower a company’s payout ratios, the more resilient its dividend.
Click here to view the company’s payout ratio, as well as analysts’ estimates of its future dividends.
Have profits and dividends increased?
Companies with steadily increasing earnings per share are generally the best dividend-paying stocks because they generally find it easier to increase dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to sell heavily at the same time. For this reason, we are pleased to see that Navient’s earnings per share have grown 12% per year over the past five years.
Most investors will primarily assess a company’s dividend prospects by checking the historical rate of dividend growth. Since the start of our data 10 years ago, Navient has increased its dividend by around 4.8% per year on average. It’s good to see that both earnings and dividend have improved – although the former has grown much faster than the latter, perhaps because the company is reinvesting more of its profits in growth.
From a dividend perspective, should investors buy or avoid Navient? Companies like Navient, which grow rapidly and pay a small fraction of the profits, typically reinvest heavily in their business. This strategy can provide significant added value to shareholders over the long term – provided it is carried out without issuing too many new shares. Navient ticks a lot of boxes for us from a dividend standpoint, and we believe these characteristics should mark the company as deserving more attention.
With this in mind, an essential part of thorough stock research is to be aware of all the risks that stocks currently face. We have identified 4 warning signs with Navient (at least 2 that shouldn’t be ignored), and understanding them should be part of your investment process.
If you are looking for dividend paying stocks, we recommend that you take a look at our list of top dividend paying stocks with a yield above 2% and a dividend coming soon.
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This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take into account your goals or your financial situation. We aim to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative information. Simply Wall St has no position in any of the stocks mentioned.
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