Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Lassonde Industries Inc. (TSE:LAS.A) is about to go ex-dividend in just 3 days. Investors can purchase shares before the 22nd of February in order to be eligible for this dividend, which will be paid on the 15th of March.
Lassonde Industries's next dividend payment will be CA$0.65 per share, and in the last 12 months, the company paid a total of CA$2.55 per share. Calculating the last year's worth of payments shows that Lassonde Industries has a trailing yield of 1.5% on the current share price of CA$172. If you buy this business for its dividend, you should have an idea of whether Lassonde Industries's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Lassonde Industries paid out just 17% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether Lassonde Industries generated enough free cash flow to afford its dividend. Luckily it paid out just 8.4% of its free cash flow last year.
It's positive to see that Lassonde Industries's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Lassonde Industries's earnings per share have been growing at 18% a year for the past five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Lassonde Industries has increased its dividend at approximately 9.2% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Has Lassonde Industries got what it takes to maintain its dividend payments? Lassonde Industries has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. Overall we think this is an attractive combination and worthy of further research.
Wondering what the future holds for Lassonde Industries? See what the two analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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. 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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