Lennar Corporation (NYSE:LEN) is about to trade ex-dividend in the next 4 days. If you purchase the stock on or after the 23rd of January, you won’t be eligible to receive this dividend, when it is paid on the 7th of February.
Lennar’s next dividend payment will be US$0.13 per share, on the back of last year when the company paid a total of US$0.50 to shareholders. Calculating the last year’s worth of payments shows that Lennar has a trailing yield of 0.8% on the current share price of $63.09. We love seeing companies pay a dividend, but it’s also important to be sure that laying the golden eggs isn’t going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it’s growing.
View our latest analysis for Lennar
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Lennar paid out just 2.8% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Lennar’s earnings per share have been growing at 14% a year for the past five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. In the last ten years, Lennar has lifted its dividend by approximately 12% a year on average. It’s exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
The Bottom Line
Should investors buy Lennar for the upcoming dividend? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Overall, Lennar looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
Curious what other investors think of Lennar? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
We wouldn’t recommend just buying the first dividend stock you see, though. Here’s a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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.
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