Lorne Park Capital Partners (CVE:LPC) Is Due To Pay A Dividend Of CA$0.007

The board of Lorne Park Capital Partners Inc. (CVE:LPC) has announced that it will pay a dividend of CA$0.007 per share on the 31st of January. This means the annual payment is 2.2% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Lorne Park Capital Partners

Lorne Park Capital Partners' Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Lorne Park Capital Partners' dividend made up quite a large proportion of earnings but only 36% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Over the next year, EPS could expand by 44.9% if recent trends continue. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 69% which would be quite comfortable going to take the dividend forward.

Lorne Park Capital Partners Doesn't Have A Long Payment History

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. The dividend has gone from an annual total of CA$0.02 in 2021 to the most recent total annual payment of CA$0.028. This means that it has been growing its distributions at 12% per annum over that time. Lorne Park Capital Partners has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

Dividend Growth Could Be Constrained

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Lorne Park Capital Partners has grown earnings per share at 45% per year over the past five years. Earnings per share is growing nicely, but the company is paying out most of its earnings as dividends. This might be sustainable, but we wonder why Lorne Park Capital Partners is not retaining those earnings to reinvest in growth.

Our Thoughts On Lorne Park Capital Partners' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Lorne Park Capital Partners' payments, as there could be some issues with sustaining them into the future. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Lorne Park Capital Partners has 4 warning signs (and 1 which is significant) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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