It looks like Nu Skin Enterprises, Inc. (NYSE:NUS) is about to go ex-dividend in the next 4 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. Therefore, if you purchase Nu Skin Enterprises' shares on or after the 29th of August, you won't be eligible to receive the dividend, when it is paid on the 10th of September.

The company's next dividend payment will be US$0.06 per share, and in the last 12 months, the company paid a total of US$0.24 per share. Based on the last year's worth of payments, Nu Skin Enterprises has a trailing yield of 2.0% on the current stock price of US$12.13. 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! So we need to investigate whether Nu Skin Enterprises can afford its dividend, and if the dividend could grow.

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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. Nu Skin Enterprises paid out just 12% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 20% of its cash flow last year.

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.

Check out our latest analysis for Nu Skin Enterprises

Click here to see how much of its profit Nu Skin Enterprises paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. Readers will understand then, why we're concerned to see Nu Skin Enterprises's earnings per share have dropped 8.2% a year over the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Nu Skin Enterprises has seen its dividend decline 16% per annum on average over the past 10 years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

The Bottom Line

Has Nu Skin Enterprises got what it takes to maintain its dividend payments? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Nu Skin Enterprises's dividend merits.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Every company has risks, and we've spotted 4 warning signs for Nu Skin Enterprises (of which 1 is a bit concerning!) you should know about.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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