Lerøy Seafood Group ASA (OB:LSG) Stock Goes Ex-Dividend In Just Four Days

Lerøy Seafood Group ASA (OB:LSG) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Meaning, you will need to purchase Lerøy Seafood Group's shares before the 24th of May to receive the dividend, which will be paid on the 2nd of June.

The company's next dividend payment will be kr2.50 per share, on the back of last year when the company paid a total of kr2.50 to shareholders. Looking at the last 12 months of distributions, Lerøy Seafood Group has a trailing yield of approximately 4.8% on its current stock price of NOK51.85. If you buy this business for its dividend, you should have an idea of whether Lerøy Seafood Group's dividend is reliable and sustainable. As a result, readers should always check whether Lerøy Seafood Group has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Lerøy Seafood Group

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Lerøy Seafood Group paid out more than half (51%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out 108% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect - but we'd generally want to look more closely here.

While Lerøy Seafood Group's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to Lerøy Seafood Group's ability to maintain its dividend.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Lerøy Seafood Group's earnings per share have been growing at 11% a year for the past five years. Earnings have been growing at a decent rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Lerøy Seafood Group has delivered an average of 14% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Has Lerøy Seafood Group got what it takes to maintain its dividend payments? It's good to see that earnings per share are growing and that the company's payout ratio is within a normal range for most businesses. However we're somewhat concerned that it paid out 108% of its cashflow, which is uncomfortably high. To summarise, Lerøy Seafood Group looks okay on this analysis, although it doesn't appear a stand-out opportunity.

With that being said, if dividends aren't your biggest concern with Lerøy Seafood Group, you should know about the other risks facing this business. In terms of investment risks, we've identified 1 warning sign with Lerøy Seafood Group and understanding them should be part of your investment process.

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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.