Lorne Park Capital Partners' (CVE:LPC) Dividend Will Be Increased To CA$0.006

The board of Lorne Park Capital Partners Inc. (CVE:LPC) has announced that the dividend on 31st of October will be increased to CA$0.006, which will be 20% higher than last year's payment of CA$0.005 which covered the same period. Based on this payment, the dividend yield for the company will be 1.7%, which is fairly typical for the industry.

See our latest analysis for Lorne Park Capital Partners

Lorne Park Capital Partners' Payment Has Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Lorne Park Capital Partners' dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

If the trend of the last few years continues, EPS will grow by 67.9% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 33%, which is in the range that makes us comfortable with the sustainability of the dividend.

Lorne Park Capital Partners Is Still Building Its Track Record

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. Since 2020, the dividend has gone from CA$0.02 total annually to CA$0.024. This works out to be a compound annual growth rate (CAGR) of approximately 9.5% a year over that time. Lorne Park Capital Partners has a nice track record of dividend growth but we would wait until we see a longer track record before getting too confident.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Lorne Park Capital Partners has impressed us by growing EPS at 68% per year over the past five years. Lorne Park Capital Partners is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

Lorne Park Capital Partners Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for Lorne Park Capital Partners (1 is a bit unpleasant!) 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 yield dividend stocks.

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