Today is Thursday, July 18, 2019, and this is your daily dividend safety update. Today we’re looking at NetEase (NASDAQ: NTES) stock to see whether its 0.89% dividend is safe.
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Let’s look at the company’s payout ratio, cash flow growth, and dividend history to gauge the probability of a dividend cut in the next few years.
Payout Ratio (Dividends/Earnings)
NetEase has a payout ratio of 19.73%. That’s low enough for us! Payout ratio equals dividends per share divided by earnings per share. A low payout ratio indicates that the company has plenty of money to cover its dividend. We’d be more concerned if the ratio was closer to 100% (or over it).
Cash Flow Growth Year-Over-Year
NetEase has grown its cash flow by 138.84% in the last year. That’s a good omen for dividend investors! When a company grows its cash flow, it can use some of that extra cash to strengthen — or even raise — its dividend.
Dividend History & Recent Cuts
NetEase has a recent history of dividend cuts. In fact, it’s only been 1 year since the last cut. That’s not a good sign. Companies that have recently cut their dividend are generally more likely to cut them again.
The Takeaway
NetEase stock has failed 1 of our 3 dividend safety metrics. With that in mind, we believe a dividend cut is possible in the next few years.
Are you worried about the safety of your dividend stocks? Is there a particular stock you want us to grade next? Leave the ticker symbol in the comment section below.
