Important news for shareholders and potential investors in Leon’s Furniture Limited (TSE:LNF): The dividend payment of CA$0.14 per share will be distributed to shareholders on 08 April 2019, and the stock will begin trading ex-dividend at an earlier date, 07 March 2019. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine Leon’s Furniture’s latest financial data to analyse its dividend characteristics.
5 checks you should use to assess a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is it paying an annual yield above 75% of dividend payers?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has it increased its dividend per share amount over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Will the company be able to keep paying dividend based on the future earnings growth?
How does Leon’s Furniture fare?
The company currently pays out 34% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting a payout ratio of 37% which, assuming the share price stays the same, leads to a dividend yield of around 3.4%.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. LNF has increased its DPS from CA$0.28 to CA$0.56 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes LNF a true dividend rockstar.
Compared to its peers, Leon’s Furniture produces a yield of 3.7%, which is high for Specialty Retail stocks but still below the market’s top dividend payers.
With these dividend metrics in mind, I definitely rank Leon’s Furniture as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three pertinent factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for LNF’s future growth? Take a look at our free research report of analyst consensus for LNF’s outlook.
- Valuation: What is LNF worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether LNF is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.