Is It Worth Considering loanDepot, Inc. (NYSE:LDI) For Its Upcoming Dividend?

Simply Wall St
September 27, 2021
Source: Shutterstock

Readers hoping to buy loanDepot, Inc. (NYSE:LDI) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. This means that investors who purchase loanDepot's shares on or after the 1st of October will not receive the dividend, which will be paid on the 18th of October.

The upcoming dividend for loanDepot will put a total of US$0.08 per share in shareholders' pockets. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether loanDepot can afford its dividend, and if the dividend could grow.

Check out our latest analysis for loanDepot

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. loanDepot has a low and conservative payout ratio of just 0.5% of its income after tax. loanDepot paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

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

NYSE:LDI Historic Dividend September 27th 2021

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. From this perspective, we're disturbed to see earnings per share plunged 30% over the last 12 months, and we'd wonder if the company has had some kind of major event that has skewed the calculation.

This is loanDepot's first year of paying a dividend, so it doesn't have much of a history yet to compare to.

To Sum It Up

Is loanDepot worth buying for its dividend? loanDepot's earnings per share are down sharply over the last year, although we note that it is paying out a low fraction of its earnings. From a dividend perspective we struggle to see value in a company with declining earnings per share, but it's also true that a one-year decline often doesn't mean much. So we wouldn't be too quick to write this one off. We think there are likely better opportunities out there.

With that being said, if dividends aren't your biggest concern with loanDepot, you should know about the other risks facing this business. For example, we've found 4 warning signs for loanDepot (2 don't sit too well with us!) that deserve your attention before investing in the shares.

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.

If you're looking to trade loanDepot, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account.Promoted

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.