Don't Buy LSI Industries Inc. (NASDAQ:LYTS) For Its Next Dividend Without Doing These Checks

LSI Industries Inc. (NASDAQ:LYTS) is about to trade ex-dividend in the next 3 days. This means that investors who purchase shares on or after the 30th of August will not receive the dividend, which will be paid on the 12th of September.

LSI Industries's next dividend payment will be US$0.05 per share, and in the last 12 months, the company paid a total of US$0.20 per share. Calculating the last year's worth of payments shows that LSI Industries has a trailing yield of 4.8% on the current share price of $4.16. If you buy this business for its dividend, you should have an idea of whether LSI Industries'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.

See our latest analysis for LSI Industries

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. LSI Industries lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable.

Click here to see how much of its profit LSI Industries paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. LSI Industries reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. It looks like the LSI Industries dividends are largely the same as they were ten years ago. When earnings are declining yet the dividends are flat, typically the company is either paying out a higher portion of its earnings, or paying out of cash or debt on the balance sheet, neither of which is ideal.

We update our analysis on LSI Industries every 24 hours, so you can always get the latest insights on its financial health, here.

Final Takeaway

From a dividend perspective, should investors buy or avoid LSI Industries? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow. Bottom line: LSI Industries has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

Curious about whether LSI Industries has been able to consistently generate growth? Here's a chart of its historical revenue and earnings growth.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.