Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. In the last few years Liechtensteinische Landesbank Aktiengesellschaft (VTX:LLBN) has paid a dividend to shareholders. Today it yields 3.1%. Does Liechtensteinische Landesbank tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
How I analyze a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is its annual yield among the top 25% of dividend-paying companies?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has dividend per share risen in the past couple of years?
- Can it afford to pay the current rate of dividends from its earnings?
- Will it be able to continue to payout at the current rate in the future?
How does Liechtensteinische Landesbank fare?
The current trailing twelve-month payout ratio for the stock is 80%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect LLBN’s payout to fall to 63% of its earnings. Assuming a constant share price, this equates to a dividend yield of 3.6%.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Unfortunately, it is really too early to view Liechtensteinische Landesbank as a dividend investment. It has only been consistently paying dividends for 2 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, Liechtensteinische Landesbank produces a yield of 3.1%, which is on the low-side for Banks stocks.
Taking all the above into account, Liechtensteinische Landesbank is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. 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. I’ve put together three pertinent aspects you should look at:
- Valuation: What is LLBN 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 LLBN is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Liechtensteinische Landesbank’s board and the CEO’s back ground.
- 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 email@example.com. 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.