LifeWorks Inc.'s (TSE:LWRK) investors are due to receive a payment of CA$0.065 per share on 15th of November. This means the annual payment is 2.4% of the current stock price, which is above the average for the industry.
LifeWorks' Distributions May Be Difficult To Sustain
A big dividend yield for a few years doesn't mean much if it can't be sustained. Even though LifeWorks isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.
Recent, EPS has fallen by 5.0%, so this could continue over the next year. This means that the company will be unprofitable, but cash flows are more important when considering the dividend and as the current cash payout ratio is pretty healthy, we don't think there is too much reason to worry.
LifeWorks Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2011, the dividend has gone from CA$0.94 to CA$0.78. Doing the maths, this is a decline of about 1.9% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
Dividend Growth May Be Hard To Come By
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. It's not great to see that LifeWorks' earnings per share has fallen at approximately 5.0% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.
Our Thoughts On LifeWorks' Dividend
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about LifeWorks' payments, as there could be some issues with sustaining them into the future. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We don't think LifeWorks is a great stock to add to your portfolio if income is your focus.
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. For example, we've identified 3 warning signs for LifeWorks (1 is significant!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.