Don't Race Out To Buy Laurentian Bank of Canada (TSE:LB) Just Because It's Going Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Laurentian Bank of Canada (TSE:LB) is about to trade ex-dividend in the next 4 days. The ex-dividend date is usually set to be one business day before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least one business day to settle. This means that investors who purchase Laurentian Bank of Canada's shares on or after the 30th of June will not receive the dividend, which will be paid on the 1st of August.

The company's next dividend payment will be CA$0.47 per share, and in the last 12 months, the company paid a total of CA$1.88 per share. Based on the last year's worth of payments, Laurentian Bank of Canada has a trailing yield of 6.1% on the current stock price of CA$30.78. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

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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. Laurentian Bank of Canada is paying out an acceptable 63% of its profit, a common payout level among most companies.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

See our latest analysis for Laurentian Bank of Canada

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. So we're not too excited that Laurentian Bank of Canada's earnings are down 4.6% a year over the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Laurentian Bank of Canada has seen its dividend decline 1.0% per annum on average over the past 10 years, which is not great to see.

The Bottom Line

Is Laurentian Bank of Canada worth buying for its dividend? We're not overly enthused to see Laurentian Bank of Canada's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. Laurentian Bank of Canada doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.

With that being said, if you're still considering Laurentian Bank of Canada as an investment, you'll find it beneficial to know what risks this stock is facing. Every company has risks, and we've spotted 1 warning sign for Laurentian Bank of Canada you should know about.

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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.