Readers hoping to buy Lazard Ltd (NYSE:LAZ) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Investors can purchase shares before the 14th of February in order to be eligible for this dividend, which will be paid on the 28th of February.
Lazard’s upcoming dividend is US$0.47 a share, following on from the last 12 months, when the company distributed a total of US$2.38 per share to shareholders. Based on the last year’s worth of payments, Lazard has a trailing yield of 5.5% on the current stock price of $43.52. 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! So we need to investigate whether Lazard can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Lazard is paying out an acceptable 71% of its profit, a common payout level among most companies.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Lazard’s earnings per share have fallen at approximately 5.7% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, ten years ago, Lazard has lifted its dividend by approximately 20% a year on average. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it’s always worth checking for when the company can’t increase the payout ratio any more – because then the music stops.
To Sum It Up
Should investors buy Lazard for the upcoming dividend? We’re not overly enthused to see Lazard’s earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. All things considered, we’re not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.
Curious what other investors think of Lazard? 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 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.
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