LifeWorks (TSE:LWRK) Has Re-Affirmed Its Dividend Of CA$0.065

LifeWorks Inc.'s (TSE:LWRK) investors are due to receive a payment of CA$0.065 per share on 15th of December. The dividend yield will be 2.9% based on this payment which is still above the industry average.

View our latest analysis for LifeWorks

LifeWorks' Distributions May Be Difficult To Sustain

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. LifeWorks is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. 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 14.0%, so this could continue over the next year. This means that the company won't turn a profit over the next year, but with healthy cash flows at the moment the dividend could still be okay to continue.

LifeWorks Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The first annual payment during the last 10 years was CA$0.94 in 2011, and the most recent fiscal year payment was CA$0.78. This works out to be a decline of approximately 1.9% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth Potential Is Shaky

Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. LifeWorks' EPS has fallen by approximately 14% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

In Summary

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 company is generating plenty of cash, but we still think the dividend is a bit high for comfort. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. To that end, LifeWorks has 4 warning signs (and 1 which is concerning) we think you should know about. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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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