Why You Might Be Interested In Lake Shore Bancorp, Inc. (NASDAQ:LSBK) For Its Upcoming Dividend

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 three days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, Lake Shore Bancorp investors that purchase the stock on or after the 12th of August will not receive the dividend, which will be paid on the 16th of August.

The company's upcoming dividend is US$0.18 a share, following on from the last 12 months, when the company distributed a total of US$0.72 per share to shareholders. Calculating the last year's worth of payments shows that Lake Shore Bancorp has a trailing yield of 5.7% on the current share price of US$12.60. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Lake Shore Bancorp can afford its dividend, and if the dividend could grow.

Check out 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. That's why it's good to see Lake Shore Bancorp paying out a modest 25% of its earnings.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

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

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at Lake Shore Bancorp, with earnings per share up 3.7% 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 an average of 9.9% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Is Lake Shore Bancorp an attractive dividend stock, or better left on the shelf? Lake Shore Bancorp has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. Lake Shore Bancorp ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

So while Lake Shore Bancorp looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Our analysis shows 2 warning signs for Lake Shore Bancorp and you should be aware of them before buying any shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.