L.D.C. S.A. (EPA:LOUP) stock is about to trade ex-dividend in three days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase L.D.C's shares before the 25th of August in order to receive the dividend, which the company will pay on the 27th of August.
The company's next dividend payment will be €2.25 per share. Last year, in total, the company distributed €2.25 to shareholders. Calculating the last year's worth of payments shows that L.D.C has a trailing yield of 2.0% on the current share price of €112.60. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. L.D.C is paying out just 24% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether L.D.C generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 22% 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.
View our latest analysis for L.D.C
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, L.D.C's earnings per share have been growing at 18% a year for the past five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. L.D.C has delivered an average of 14% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
To Sum It Up
Should investors buy L.D.C for the upcoming dividend? It's great that L.D.C is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. There's a lot to like about L.D.C, and we would prioritise taking a closer look at it.
In light of that, while L.D.C has an appealing dividend, it's worth knowing the risks involved with this stock. In terms of investment risks, we've identified 1 warning sign with L.D.C and understanding them should be part of your investment process.
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.
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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.