Luxfer Holdings (NYSE:LXFR) Is Due To Pay A Dividend Of $0.13

Luxfer Holdings PLC's (NYSE:LXFR) investors are due to receive a payment of $0.13 per share on 2nd of August. This makes the dividend yield 3.7%, which will augment investor returns quite nicely.

View our latest analysis for Luxfer Holdings

Luxfer Holdings' Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last dividend, Luxfer Holdings is earning enough to cover the payment, but then it makes up 932% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

If the trend of the last few years continues, EPS will grow by 4.2% over the next 12 months. If the dividend continues on this path, the payout ratio could be 56% by next year, which we think can be pretty sustainable going forward.

Luxfer Holdings Doesn't Have A Long Payment History

It is great to see that Luxfer Holdings has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2018, the annual payment back then was $0.50, compared to the most recent full-year payment of $0.52. Dividend payments have grown at less than 1% a year over this period. We like that the dividend hasn't been shrinking. However we're conscious that the company hasn't got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings per share has been crawling upwards at 4.2% per year. Growth of 4.2% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

Our Thoughts On Luxfer Holdings' Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Luxfer Holdings is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Luxfer Holdings has 2 warning signs (and 1 which can't be ignored) we think you should know about. Is Luxfer Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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