Assigning an “F” rating to Newell Brands (NASDAQ:NWL) stock might seem harsh, especially since you’ll probably recognize some of the product names controlled by Newell Brands.
Yet, the company’s financials are subpar and Newell Brands’ dividend payouts have been slashed. All in all, you’re better off finding another consumer goods company to consider investing in.
Not long ago, Will Ashworth included Newell Brands on his list of “ailing companies” that “could stand to be shaken up by activist investors.”
That’s a fair assessment, but activist investors aren’t lining up to rescue Newell Brands. As we’ll argue today, that may be because Newell Brands simply isn’t worth rescuing.
| NWL | Newell Brands | $8.68 |
Known Products, Poor Financials
Really, there are only two reasons to consider Newell Brands stock at all. One is the company’s product lineup, which includes Rubbermaid containers and Sharpie markers.
Perhaps during times of elevated inflation and recession worries, however, cost-conscious shoppers are likely to turn to cheaper brands than Rubbermaid and Sharpie. (Feel free to visit your local dollar store to see some of the similar off-brand offerings.)
The other main reason to consider investing in Newell Brands is the dividend – but we’ll discuss that issue momentarily. For now, let’s take a closer look at Newell Brands’ financials, which are less than stellar.
Newell Brands flipped from normalized diluted EPS of 16 cents in 2022’s fourth quarter, to an EPS loss of 6 cents in 2023’s first quarter. Newell Brands also reported year-over-year core sales and net sales declines in both Q4 2022 and Q1 2023.
Finally, here’s a jaw-dropper. According to the company, “At the end of the first quarter [of 2023], Newell Brands had cash and cash equivalents of $271 million and net debt outstanding of $5.4 billion.” That’s a startling imbalance, wouldn’t you agree?
The NWL Stock Dividend Could Be in Jeopardy
Given Newell Brands’ awful financials, it’s going to be challenging for the company to continue paying a dividend. Indeed, there’s already evidence that Newell Brands has had difficulty maintaining its dividend yield.
Last month, Newell Brands disclosed it had reduced its quarterly dividend to 7 cents. What Newell Brands didn’t mention in the press release (probably because it’s embarrassing) is that the quarterly dividend has been much higher, at 23 cents.
That’s a bad sign, if there ever was one. Moreover, Newell Brands’ trailing 12-month dividend payout ratio is rather high at 63.33%. Here’s a rule of thumb to put this into perspective.
When a company is paying out more than 50% of its EPS in dividend distributions, it’s definitely possible that the dividend is unsustainable.
Newell Doesn’t Deserve Your Attention or Money
Newell Brands stock has been “dead money” for a while, as it’s far below its 1998 and 2017 peaks. The dividend payouts might provide a small consolation prize, but those payments might end at some point.
Besides, having some well-known products isn’t enough. Newell Brands is clearly failing to leverage those brand names into per-share profits. Therefore, there’s no need for anyone to rush out and buy NWL stock. It gets an “F” rating and could continue to be “dead money” for the foreseeable future.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
