Lifetime Brands, Inc. (NASDAQ:LCUT) Is About To Go Ex-Dividend, And It Pays A 2.8% Yield

It looks like Lifetime Brands, Inc. (NASDAQ:LCUT) is about to go ex-dividend in the next 4 days. 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase Lifetime Brands' shares on or after the 31st of January will not receive the dividend, which will be paid on the 14th of February.

The company's next dividend payment will be US$0.0425 per share. Last year, in total, the company distributed US$0.17 to shareholders. Calculating the last year's worth of payments shows that Lifetime Brands has a trailing yield of 2.8% on the current share price of US$6.00. 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 Lifetime Brands can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Lifetime Brands

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. Lifetime Brands's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If Lifetime Brands didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. It paid out 11% of its free cash flow as dividends last year, which is conservatively low.

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

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. If earnings fall far enough, the company could be forced to cut its dividend. Lifetime Brands reported a loss last year, but at least the general trend suggests its income has been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Lifetime Brands has increased its dividend at approximately 1.3% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

Get our latest analysis on Lifetime Brands's balance sheet health here.

The Bottom Line

From a dividend perspective, should investors buy or avoid Lifetime Brands? 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." In summary, it's hard to get excited about Lifetime Brands from a dividend perspective.

While it's tempting to invest in Lifetime Brands for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 1 warning sign for Lifetime Brands 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.

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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.