Do These 3 Checks Before Buying Network-1 Technologies, Inc. (NYSEMKT:NTIP) For Its Upcoming Dividend

It looks like Network-1 Technologies, Inc. (NYSEMKT:NTIP) is about to go ex-dividend in the next four days. This means that investors who purchase shares on or after the 11th of September will not receive the dividend, which will be paid on the 30th of September.

Network-1 Technologies's upcoming dividend is US$0.05 a share, following on from the last 12 months, when the company distributed a total of US$0.10 per share to shareholders. Calculating the last year's worth of payments shows that Network-1 Technologies has a trailing yield of 4.5% on the current share price of $2.2. 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! We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Network-1 Technologies

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Network-1 Technologies paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If Network-1 Technologies didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term.

Click here to see how much of its profit Network-1 Technologies paid out over the last 12 months.

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. Network-1 Technologies 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.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Network-1 Technologies's dividend payments are effectively flat on where they were four years ago. When earnings are declining yet the dividends are flat, typically the company is either paying out a higher portion of its earnings, or paying out of cash or debt on the balance sheet, neither of which is ideal.

We update our analysis on Network-1 Technologies every 24 hours, so you can always get the latest insights on its financial health, here.

Final Takeaway

Is Network-1 Technologies an attractive dividend stock, or better left on the shelf? We're a bit uncomfortable with it paying a dividend while being loss-making, especially given that the dividend was not well covered by free cash flow. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Network-1 Technologies.

Although, if you're still interested in Network-1 Technologies and want to know more, you'll find it very useful to know what risks this stock faces. For example, Network-1 Technologies has 4 warning signs (and 1 which is a bit unpleasant) we think you should know about.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

This article by Simply Wall St is general in nature. 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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