Yahoo Finance Do These 3 Checks Before Buying Lifetime Brands, Inc. (NASDAQ:LCUT) For Its Upcoming Dividend
It looks like Lifetime Brands, Inc. (NASDAQ:LCUT) is about to go ex-dividend in the next 3 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase Lifetime Brands' shares on or after the 31st of October will not receive the dividend, which will be paid on the 15th of November.
The company's next dividend payment will be US$0.043 per share. Last year, in total, the company distributed US$0.17 to shareholders. Calculating the last year's worth of payments shows that Lifetime Brands has a trailing yield of 2.1% on the current share price of $8.13. 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 check whether the dividend payments are covered, and if earnings are growing.
Check out our latest analysis for Lifetime Brands
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see Lifetime Brands paying out a modest 41% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Lifetime Brands paid a dividend despite reporting negative free cash flow last year. That's typically a bad combination and - if this were more than a one-off - not sustainable.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're discomforted by Lifetime Brands's 18% per annum decline in earnings in the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Lifetime Brands has lifted its dividend by approximately 5.4% a year on average.
The Bottom Line
From a dividend perspective, should investors buy or avoid Lifetime Brands? It's disappointing to see earnings per share declining, and this would ordinarily be enough to discourage us from most dividend stocks, even though Lifetime Brands is paying out less than half its income as dividends. However, it's also paying out an uncomfortably high percentage of its cash flow, which makes us wonder just how sustainable the dividend really is. It's not that we think Lifetime Brands is a bad company, but these characteristics don't generally lead to outstanding dividend performance.
With that being said, if you're still considering Lifetime Brands as an investment, you'll find it beneficial to know what risks this stock is facing. To help with this, we've discovered 4 warning signs for Lifetime Brands (1 is a bit concerning!) that you ought to be aware of before buying the shares.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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