Stock Analysis

Here's What We Like About Lincoln Electric Holdings' (NASDAQ:LECO) Upcoming Dividend

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NasdaqGS:LECO
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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 Lincoln Electric Holdings, Inc. (NASDAQ:LECO) is about to go ex-dividend in just 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Lincoln Electric Holdings' shares before the 29th of September to receive the dividend, which will be paid on the 14th of October.

The company's next dividend payment will be US$0.56 per share, and in the last 12 months, the company paid a total of US$2.24 per share. Based on the last year's worth of payments, Lincoln Electric Holdings stock has a trailing yield of around 1.8% on the current share price of $127.55. If you buy this business for its dividend, you should have an idea of whether Lincoln Electric Holdings's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Lincoln Electric Holdings

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Lincoln Electric Holdings paid out a comfortable 36% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It distributed 43% of its free cash flow as dividends, a comfortable payout level for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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

historic-dividend
NasdaqGS:LECO Historic Dividend September 24th 2022

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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Lincoln Electric Holdings's earnings per share have risen 16% per annum over the last five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Lincoln Electric Holdings has lifted its dividend by approximately 13% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

From a dividend perspective, should investors buy or avoid Lincoln Electric Holdings? We love that Lincoln Electric Holdings is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. It's a promising combination that should mark this company worthy of closer attention.

In light of that, while Lincoln Electric Holdings has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 2 warning signs for Lincoln Electric Holdings you should know about.

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

What are the risks and opportunities for Lincoln Electric Holdings?

Lincoln Electric Holdings, Inc., through its subsidiaries, designs, develops, manufactures, and sells welding, cutting, and brazing products worldwide.

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Rewards

  • Price-To-Earnings ratio (19.5x) is below the Machinery industry average (20.9x)

  • Earnings are forecast to grow 4.32% per year

  • Earnings grew by 63.8% over the past year

Risks

  • Has a high level of debt

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Share Price

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Lincoln Electric Holdings

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About NasdaqGS:LECO

Lincoln Electric Holdings

Lincoln Electric Holdings, Inc., through its subsidiaries, designs, develops, manufactures, and sells welding, cutting, and brazing products worldwide.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation1
Future Growth2
Past Performance6
Financial Health4
Dividends5

Read more about these checks in the individual report sections or in our analysis model.

Outstanding track record established dividend payer.