Today we'll take a closer look at Lifetime Brands, Inc. (NASDAQ:LCUT) from a dividend investor's perspective. Owning a strong business and reinvesting the dividends is widely seen as an attractive way of growing your wealth. If you are hoping to live on your dividends, it's important to be more stringent with your investments than the average punter. Regular readers know we like to apply the same approach to each dividend stock, and we hope you'll find our analysis useful.
A slim 1.1% yield is hard to get excited about, but the long payment history is respectable. At the right price, or with strong growth opportunities, Lifetime Brands could have potential. Some simple research can reduce the risk of buying Lifetime Brands for its dividend - read on to learn more.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Comparing dividend payments to a company's net profit after tax is a simple way of reality-checking whether a dividend is sustainable. While Lifetime Brands pays a dividend, it reported a loss over the last year. When a company is loss-making, we next need to check to see if its cash flows can support the dividend.
Consider getting our latest analysis on Lifetime Brands' financial position here.
Before buying a stock for its income, we want to see if the dividends have been stable in the past, and if the company has a track record of maintaining its dividend. Lifetime Brands has been paying dividends for a long time, but for the purpose of this analysis, we only examine the past 10 years of payments. The dividend has been stable over the past 10 years, which is great. We think this could suggest some resilience to the business and its dividends. During the past 10-year period, the first annual payment was US$0.1 in 2011, compared to US$0.2 last year. This works out to be a compound annual growth rate (CAGR) of approximately 5.4% a year over that time.
Companies like this, growing their dividend at a decent rate, can be very valuable over the long term, if the rate of growth can be maintained.
Dividend Growth Potential
Dividend payments have been consistent over the past few years, but we should always check if earnings per share (EPS) are growing, as this will help maintain the purchasing power of the dividend. Over the past five years, it looks as though Lifetime Brands' EPS have declined at around 73% a year. With this kind of significant decline, we always wonder what has changed in the business. Dividends are about stability, and Lifetime Brands' earnings per share, which support the dividend, have been anything but stable.
To summarise, shareholders should always check that Lifetime Brands' dividends are affordable, that its dividend payments are relatively stable, and that it has decent prospects for growing its earnings and dividend. First, it's not great to see a dividend being paid despite the company being unprofitable over the last year. It's not great to see earnings per share shrinking. The dividends have been relatively consistent, but we wonder for how much longer this will be true. Lifetime Brands might not be a bad business, but it doesn't show all of the characteristics we look for in a dividend stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Lifetime Brands that you should be aware of before investing.
Looking for more high-yielding dividend ideas? Try our curated list of dividend stocks with a yield above 3%.
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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.
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. 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.
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