Limoneira (NASDAQ:LMNR) Has Affirmed Its Dividend Of $0.075

Limoneira Company's (NASDAQ:LMNR) investors are due to receive a payment of $0.075 per share on 15th of January. The dividend yield is 1.1% based on this payment, which is a little bit low compared to the other companies in the industry.

View our latest analysis for Limoneira

Limoneira's Projections Indicate Future Payments May Be Unsustainable

If it is predictable over a long period, even low dividend yields can be attractive. Based on the last payment, earnings were actually smaller than the dividend, and the company was actually spending more cash than it was making. Paying out such a large dividend compared to earnings while also not generating free cash flows is a major warning sign for the sustainability of the dividend as these levels are certainly a bit high.

Looking forward, earnings per share is forecast to fall by 36.2% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 164%, which is definitely a bit high to be sustainable going forward.

Limoneira Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of $0.15 in 2014 to the most recent total annual payment of $0.30. This works out to be a compound annual growth rate (CAGR) of approximately 7.2% a year over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

Dividend Growth Could Be Constrained

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Limoneira has grown earnings per share at 45% per year over the past five years. While EPS is growing rapidly, Limoneira paid out a very high 96% of its income as dividends. If earnings continue to grow, this dividend may be sustainable, but we think a payout this high definitely bears watching.

Limoneira's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We don't think Limoneira is a great stock to add to your portfolio if income is your focus.

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. For example, we've identified 2 warning signs for Limoneira (1 makes us a bit uncomfortable!) that you should be aware of before investing. Is Limoneira not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.