Have you been keeping an eye on La-Z-Boy Incorporated’s (NYSE:LZB) upcoming dividend of US$0.13 per share payable on the 20 March 2019? Then you only have 2 days left before the stock starts trading ex-dividend on the 08 March 2019. Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let’s take a look at La-Z-Boy’s most recent financial data to examine its dividend characteristics in more detail.
How I analyze a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is its annual yield among the top 25% of dividend-paying companies?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has dividend per share risen in the past couple of years?
- Can it afford to pay the current rate of dividends from its earnings?
- Will it have the ability to keep paying its dividends going forward?
How does La-Z-Boy fare?
The current trailing twelve-month payout ratio for the stock is 23%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 24% which, assuming the share price stays the same, leads to a dividend yield of around 1.9%. In addition to this, EPS should increase to $2.18.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Unfortunately, it is really too early to view La-Z-Boy as a dividend investment. It has only been consistently paying dividends for 6 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
In terms of its peers, La-Z-Boy generates a yield of 1.5%, which is on the low-side for Consumer Durables stocks.
Whilst there are few things you may like about La-Z-Boy from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. I’ve put together three important aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for LZB’s future growth? Take a look at our free research report of analyst consensus for LZB’s outlook.
- Valuation: What is LZB worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether LZB is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.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. Thank you for reading.