Lectra (EPA:LSS) Has Announced That Its Dividend Will Be Reduced To €0.36

Lectra SA (EPA:LSS) is reducing its dividend from last year's comparable payment to €0.36 on the 3rd of May. The yield is still above the industry average at 1.1%.

Check out our latest analysis for Lectra

Lectra's Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last dividend was quite easily covered by Lectra's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

The next year is set to see EPS grow by 129.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 18%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was €0.22, compared to the most recent full-year payment of €0.36. This means that it has been growing its distributions at 5.0% per annum over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Dividend's Growth Prospects Are Limited

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. However, Lectra's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

In Summary

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Without at least some growth in earnings per share over time, the dividend will eventually come under pressure either from competition or inflation. See if the 3 analysts are forecasting a turnaround in our free collection of analyst estimates here. Is Lectra not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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