Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Laurentian Bank of Canada (TSE:LB) is about to go ex-dividend in just three days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Thus, you can purchase Laurentian Bank of Canada's shares before the 30th of June in order to receive the dividend, which the company will pay on the 1st of August.
The company's next dividend payment will be CA$0.40 per share, and in the last 12 months, the company paid a total of CA$1.60 per share. Based on the last year's worth of payments, Laurentian Bank of Canada has a trailing yield of 3.6% on the current stock price of CA$44.78. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. 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. Fortunately Laurentian Bank of Canada's payout ratio is modest, at just 44% of profit.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
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. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Laurentian Bank of Canada, with earnings per share up 2.7% on average over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Laurentian Bank of Canada has delivered an average of 1.1% per year annual increase in its dividend, based on the past 10 years of dividend payments.
To Sum It Up
From a dividend perspective, should investors buy or avoid Laurentian Bank of Canada? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. Laurentian Bank of Canada ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
On that note, you'll want to research what risks Laurentian Bank of Canada is facing. In terms of investment risks, we've identified 2 warning signs with Laurentian Bank of Canada and understanding them should be part of your investment process.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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This article by Simply Wall St is general in nature. 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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