Law Debenture (LON:LWDB) Will Pay A Dividend Of £0.0725

The board of The Law Debenture Corporation p.l.c. (LON:LWDB) has announced that it will pay a dividend on the 26th of January, with investors receiving £0.0725 per share. This means that the annual payment will be 3.8% of the current stock price, which is in line with the average for the industry.

Check out our latest analysis for Law Debenture

Law Debenture Might Find It Hard To Continue The Dividend

Solid dividend yields are great, but they only really help us if the payment is sustainable. Law Debenture is unprofitable despite paying a dividend, and it is paying out 116% of its free cash flow. This is quite a strong warning sign that the dividend may not be sustainable.

Over the next year, EPS might fall by 0.6% based on recent performance. This means the company won't be turning a profit, which could place managers in the tough spot of having to choose between suspending the dividend or putting more pressure on the balance sheet.

Law Debenture Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2012, the dividend has gone from £0.135 total annually to £0.29. This implies that the company grew its distributions at a yearly rate of about 7.9% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Law Debenture May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Law Debenture hasn't seen much change in its earnings per share over the last five years.

Law Debenture's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. Although they have been consistent in the past, we think the payments are a little high to be sustained. We don't think Law Debenture is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 4 warning signs for Law Debenture (3 are concerning!) that you should be aware of before investing. Is Law Debenture not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.