Lassonde Industries (TSE:LAS.A) Has Announced That Its Dividend Will Be Reduced To CA$0.70

By
Simply Wall St
Published
May 19, 2022
TSX:LAS.A
Source: Shutterstock

Lassonde Industries Inc. (TSE:LAS.A) is reducing its dividend to CA$0.70 on the 15th of Junewhich is 20% less than last year. Despite the cut, the dividend yield of 2.7% will still be comparable to other companies in the industry.

View our latest analysis for Lassonde Industries

Lassonde Industries' Earnings Easily Cover the Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, Lassonde Industries was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 14.4%. If the dividend continues on this path, the payout ratio could be 30% by next year, which we think can be pretty sustainable going forward.

historic-dividend
TSX:LAS.A Historic Dividend May 19th 2022

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from CA$1.20 in 2012 to the most recent annual payment of CA$3.52. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. Lassonde Industries has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Lassonde Industries May Find It Hard To Grow The Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Unfortunately, Lassonde Industries' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. While EPS growth is quite low, Lassonde Industries has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On Lassonde Industries' Dividend

Overall, while it's not great to see that the dividend has been cut, we think the company is now in a good position to make consistent payments going into the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

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. Taking the debate a bit further, we've identified 1 warning sign for Lassonde Industries that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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