Is It Worth Considering Lake Shore Bancorp, Inc. (NASDAQ:LSBK) For Its Upcoming Dividend?

By
Simply Wall St
Published
October 30, 2020
NasdaqGM:LSBK

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Lake Shore Bancorp, Inc. (NASDAQ:LSBK) is about to go ex-dividend in just 4 days. Investors can purchase shares before the 4th of November in order to be eligible for this dividend, which will be paid on the 19th of November.

Lake Shore Bancorp's next dividend payment will be US$0.13 per share, on the back of last year when the company paid a total of US$0.52 to shareholders. Last year's total dividend payments show that Lake Shore Bancorp has a trailing yield of 4.2% on the current share price of $12.5. If you buy this business for its dividend, you should have an idea of whether Lake Shore Bancorp's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Lake Shore Bancorp

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Lake Shore Bancorp is paying out an acceptable 64% of its profit, a common payout level among most companies.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see how much of its profit Lake Shore Bancorp paid out over the last 12 months.

historic-dividend
NasdaqGM:LSBK Historic Dividend October 30th 2020

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 earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Lake Shore Bancorp, with earnings per share up 6.8% on average over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Lake Shore Bancorp has delivered 8.0% dividend growth per year on average over the past 10 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

Should investors buy Lake Shore Bancorp for the upcoming dividend? Lake Shore Bancorp has been generating some growth in earnings per share while paying out more than half of its earnings to shareholders in the form of dividends. At best we would put it on a watch-list to see if business conditions improve, as it doesn't look like a clear opportunity right now.

If you want to look further into Lake Shore Bancorp, it's worth knowing the risks this business faces. Every company has risks, and we've spotted 2 warning signs for Lake Shore Bancorp you should know about.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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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. 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.
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