National Instruments Corporation (NASDAQ:NATI) Stock Goes Ex-Dividend In Just Three Days

National Instruments Corporation (NASDAQ:NATI) is about to trade ex-dividend in the next 3 days. This means that investors who purchase shares on or after the 14th of August will not receive the dividend, which will be paid on the 8th of September.

National Instruments's upcoming dividend is US$0.26 a share, following on from the last 12 months, when the company distributed a total of US$1.04 per share to shareholders. Looking at the last 12 months of distributions, National Instruments has a trailing yield of approximately 2.9% on its current stock price of $36.26. 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! As a result, readers should always check whether National Instruments has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for National Instruments

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. National Instruments paid out more than half (53%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 80% 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 encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, National Instruments's earnings per share have been growing at 14% a year for the past five years. The company paid out most of its earnings as dividends over the last year, even though business is booming and earnings per share are growing rapidly. Higher earnings generally bode well for growing dividends, although with seemingly strong growth prospects we'd wonder why management are not reinvesting more in the business.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, National Instruments has lifted its dividend by approximately 13% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Has National Instruments got what it takes to maintain its dividend payments? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. That's why we're glad to see National Instruments's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 53% and 80% respectively. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of National Instruments's dividend merits.

In light of that, while National Instruments has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 2 warning signs for National Instruments (1 is a bit concerning!) that you ought to be aware of before buying the shares.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

This article by Simply Wall St is general in nature. 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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