The board of National Research Corporation (NASDAQ:NRC) has announced that it will pay a dividend of $0.12 per share on the 10th of January. Based on this payment, the dividend yield on the company's stock will be 2.8%, which is an attractive boost to shareholder returns.

See our latest analysis for National Research

National Research's Projected Earnings Seem Likely To Cover Future Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last dividend was quite easily covered by National Research's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Unless the company can turn things around, EPS could fall by 1.2% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 47%, which is definitely feasible to continue.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was $1.44, compared to the most recent full-year payment of $0.48. The dividend has fallen 67% over that period. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend's Growth Prospects Are Limited

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Although it's important to note that National Research's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. To that end, National Research has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about. Is National Research not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.