It looks like Laurentian Bank of Canada (TSE:LB) is about to go ex-dividend in the next 4 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 important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Laurentian Bank of Canada investors that purchase the stock on or after the 29th of September will not receive the dividend, which will be paid on the 1st of November.
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 stock has a trailing yield of around 3.9% on the current share price of CA$40.75. If you buy this business for its dividend, you should have an idea of whether Laurentian Bank of Canada's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately Laurentian Bank of Canada's payout ratio is modest, at just 38% of profit.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Laurentian Bank of Canada earnings per share are up 5.7% per annum over the last five years.
We'd also point out that Laurentian Bank of Canada issued a meaningful number of new shares in the past year. It's hard to grow dividends per share when a company keeps creating new shares.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. It looks like the Laurentian Bank of Canada dividends are largely the same as they were 10 years ago.
The Bottom Line
Is Laurentian Bank of Canada worth buying for its dividend? 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. We think this is a pretty attractive combination, and would be interested in investigating Laurentian Bank of Canada more closely.
In light of that, while Laurentian Bank of Canada has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 1 warning sign for Laurentian Bank of Canada and you should be aware of it before buying any shares.
If you're in the market for dividend stocks, we recommend checking our list of top 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. 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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