Last update on 2024-06-27

Nexstar Media Group (NXST) - Dividend Analysis (Final Score: 6/8)

Analyzing the performance and stability of Nexstar Media Group's (NXST) dividend policy, revealing a score of 6/8 across 8 key criteria.

Short Analysis - Dividend Score: 6

We're running Nexstar Media Group (NXST) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

Nexstar Media Group (NXST) underwent a dividend analysis using 8 criteria, and it scored 6 out of 8. Key insights include a higher-than-industry-average dividend yield (3.445% against 2.78%), consistent dividend growth, and improved earnings and cash flow coverage since 2013. However, the company showed instability in dividends due to fluctuations and does not meet the 25-year dividend payment criterion. Nonetheless, recent trends in stock repurchases highlight Nexstar's confidence in its financial health.

Insights for Value Investors Seeking Stable Income

Considering Nexstar Media Group's strong current dividend yield, consistent and improving coverage, and ongoing stock repurchases, it appears promising for income-focused investors. However, potential investors should be cautious about its historical dividend instability and lack of a long-term dividend payment history. This stock may be suitable if you are looking for potentially higher dividends now but are willing to accept some historical volatility.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield provides insight into the income generated from owning a stock relative to its price.

As of 2023, Nexstar Media Group (NXST) boasts a dividend yield of 3.445%, which is significantly higher than the industry average of 2.78%. This bullish trend is a positive indicator for investors seeking income generation. Over the past two decades, NXST's dividend yield has shown a marked increase, particularly after 2013. From 0.8613% in 2013, it has climbed steadily to the current 3.445%, showcasing strong and consistent dividend growth. In contrast, the industry average has fluctuated more erratically, spiking notably in uncertain times (2008) and gradually stabilizing. NXST's robust dividend yield, coupled with consistent payouts, highlights its potential as a reliable income investment compared to its peers.

Average annual Growth Rate higher than 5% in the last 20 years?

Assessing Nexstar Media Group's dividend growth rate is crucial for investors. A growth rate above 5% indicates expanding company profitability and shareholder returns.

The dividend per share has shown variability over the years with an average dividend ratio of 13.14%. Although the dividends have not been consistent every year, especially with a significant increase to 50 in 2023 from 28.57 in 2022, the general trend over the last two decades shows significant average growth. However, the abrupt fluctuations suggest volatility, meaning careful analysis and monitoring are necessary. Thus, compared to the 5% benchmark, this trend might be favorable but comes with some risk due to variability. The trend is mostly positive but slightly unstable.

Average annual Payout Ratio lower than 65% in the last 20 years?

Explain the criterion for Nexstar Media Group (NXST) and why it is important to consider

The average payout ratio below 65% over the last 20 years is crucial because it suggests that Nexstar Media Group is retaining enough of its earnings for reinvestment, growth, and for absorbing economic shocks. An excessively high payout ratio can indicate potential future payout cuts, which is a risk for dividend-focused investors.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings is a crucial criterion as it indicates that the company generates enough earnings to support its dividend payouts. This ensures financial stability and reduces the risk of dividend cuts.

Nexstar Media Group's (NXST) earnings per share (EPS) have shown significant volatility over the years, with notable improvements particularly from 2012 onwards. Since the inception of dividend payments in 2013, EPS coverage has varied substantially. Initially, dividends were covered poorly by earnings with negative and low coverage ratios, only turning positive from 2014 onwards. For example, in 2013 the EPS was -0.0597 with a dividend per share of 0.48, resulting in a coverage ratio of approximately -8.04. By contrast, in recent years, coverage ratios have stabilized significantly. In 2022, the EPS of 24.6766 compared to a dividend per share of 3.6 resulted in a strong coverage ratio of 6.85. This reversal is a healthy sign, indicating that Nexstar's earnings are now robust enough to comfortably cover its growing dividends, fostering confidence in the company's ability to sustain and possibly increase future dividends.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow means whether a company's free cash flow sufficiently covers its dividend payouts. This is crucial as it indicates financial stability and sustainability of the dividends.

Nexstar Media Group's free cash flow (FCF) has seen significant fluctuations over the years, starting negatively in 2003 (-$6.63M) and then steadily increasing to a peak of $1.246B in 2022. On the other hand, dividend payout has been growing since 2013, from $14.3M to $191M in 2023. The ratio of dividend covered by cash flow was very low initially and even negative in 2003, indicating poor coverage. However, this ratio significantly improved in recent years, reaching 0.2247 in 2023. This trend is positive as it shows that Nexstar has become more capable of covering its dividend payouts with its free cash flow, indicating a solid and improving financial health for sustaining future dividends.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments, where the dividend per share did not drop by more than 20% over the past two decades, is important for income-seeking investors.

Evaluating Nexstar Media Group's (NXST) dividends over the past 20 years, the company began issuing dividends in 2013. Initially, the annual dividends were $0.48 and have since risen steadily to $5.40 by 2023. However, there was a notable year when Nexstar's dividend per share dropped by more than 20%. Such an event is a red flag for income-seeking investors as it signifies potential instability in the company’s ability to consistently reward shareholders. Excluding this drop, the dividend trend shows a broadly increasing pattern, which could still be viewed positively if the decrease was due to an extraordinary, non-recurring circumstance.

Dividends Paid for Over 25 Years?

This criterion checks if the company has consistently paid dividends for the last 25 years. This is important because it indicates the company's stability and reliability in returning value to shareholders over a long period.

Nexstar Media Group (NXST) has not paid dividends for anywhere close to 25 years. The data shows that the company only started paying dividends in 2013. While the trend in dividends per share has been upward since then, it doesn't meet the 25-year criterion. For long-term investors looking for a steady and historical dividend-paying company, NXST would not be the ideal choice based on this criterion.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases refer to the company's commitment to buying back its own shares consistently over an extended period. This is seen as a positive signal to investors for the company's financial health and confidence in its future performance.

The data provided shows an average repurchase of 5.7363 years out of the last 20 years. From 2013 onwards, Nexstar Media Group (NXST) has started a more consistent trend of stock repurchases, with particularly noticeable reductions in shares from 2019 to 2023. This indicates a positive trend toward shareholder value and demonstrates the company's confidence in its financial stability. Besides serving as a return of capital to shareholders, stock repurchases usually indicate that a company believes its shares are undervalued. Such a trend is considered good, as it often supports the stock price and provides an additional layer of return to the shareholders, supplementing dividends. Overall, Nexstar appears to reiterate its commitment to boosting shareholder returns.