Lifetime Brands, Inc. (NASDAQ:LCUT) will pay a dividend of $0.0425 on the 15th of November. This payment means the dividend yield will be 1.8%, which is below the average for the industry.
Lifetime Brands' Dividend Is Well Covered By Earnings
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, Lifetime Brands' earnings easily covered the dividend, but free cash flows were negative. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.
Over the next year, EPS is forecast to expand by 59.3%. If the dividend continues on this path, the payout ratio could be 27% by next year, which we think can be pretty sustainable going forward.
Lifetime Brands Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $0.10 in 2012, and the most recent fiscal year payment was $0.17. This means that it has been growing its distributions at 5.4% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.
Dividend Growth Potential Is Shaky
The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. Lifetime Brands' earnings per share has shrunk at 20% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Lifetime Brands is a great stock to add to your portfolio if income is your focus.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 4 warning signs for Lifetime Brands you should be aware of, and 1 of them is potentially serious. Is Lifetime Brands not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
What are the risks and opportunities for Lifetime Brands?
Trading at 59.9% below our estimate of its fair value
Earnings are forecast to grow 124.14% per year
No risks detected for LCUT from our risks checks.
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