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Here's Why We're Wary Of Buying Dun & Bradstreet Holdings' (NYSE:DNB) For Its Upcoming Dividend

Dun & Bradstreet Holdings, Inc. (NYSE:DNB) stock is about to trade ex-dividend in two 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase Dun & Bradstreet Holdings' shares on or after the 1st of March will not receive the dividend, which will be paid on the 16th of March.

The upcoming dividend for Dun & Bradstreet Holdings is US$0.05 per share. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Dun & Bradstreet Holdings can afford its dividend, and if the dividend could grow.

See our latest analysis for Dun & Bradstreet Holdings

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. Dun & Bradstreet Holdings reported a loss last year, so it's not great to see that it has continued paying a dividend. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. It paid out 13% of its free cash flow as dividends last year, which is conservatively low.

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

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. Dun & Bradstreet Holdings was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

This is Dun & Bradstreet Holdings's first year of paying a dividend, so it doesn't have much of a history yet to compare to.

Remember, you can always get a snapshot of Dun & Bradstreet Holdings's financial health, by checking our visualisation of its financial health, here.

Final Takeaway

Is Dun & Bradstreet Holdings worth buying for its dividend? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.

With that in mind though, if the poor dividend characteristics of Dun & Bradstreet Holdings don't faze you, it's worth being mindful of the risks involved with this business. For example - Dun & Bradstreet Holdings has 2 warning signs we think you should be aware of.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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