Laurentian Bank of Canada (TSE:LB) Is Paying Out A Dividend Of CA$0.47

The board of Laurentian Bank of Canada (TSE:LB) has announced that it will pay a dividend of CA$0.47 per share on the 1st of May. The dividend yield will be 6.8% based on this payment which is still above the industry average.

See our latest analysis for Laurentian Bank of Canada

Laurentian Bank of Canada's Earnings Will Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much.

Laurentian Bank of Canada has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on Laurentian Bank of Canada's last earnings report, the payout ratio is at a decent 53%, meaning that the company is able to pay out its dividend with a bit of room to spare.

The next year is set to see EPS grow by 8.8%. Assuming the dividend continues along recent trends, we think the future payout ratio could be 48% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was CA$2.00, compared to the most recent full-year payment of CA$1.88. The dividend has shrunk at a rate of less than 1% a year over this period. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Is Doubtful

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Laurentian Bank of Canada has seen earnings per share falling at 5.0% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

Our Thoughts On Laurentian Bank of Canada's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Laurentian Bank of Canada has been making. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Laurentian Bank of Canada that investors need to be conscious of moving forward. Is Laurentian Bank of Canada not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.