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

The board of Limoneira Company (NASDAQ:LMNR) has announced that it will pay a dividend on the 16th of July, with investors receiving US$0.075 per share. Including this payment, the dividend yield on the stock will be 1.7%, which is a modest boost for shareholders' returns.

Check out our latest analysis for Limoneira

Limoneira Might Find It Hard To Continue The Dividend

Even a low dividend yield can be attractive if it is sustained for years on end. Even though Limoneira is not generating a profit, it is still paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.

Looking forward, earnings per share could 50.5% over the next year if the trend of the last few years can't be broken. This means the company will be unprofitable and managers could face the tough choice between continuing to pay the dividend or taking pressure off the balance sheet.

Limoneira Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The first annual payment during the last 10 years was US$0.13 in 2011, and the most recent fiscal year payment was US$0.30. This works out to be a compound annual growth rate (CAGR) of approximately 9.1% 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 Potential Is Shaky

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, things aren't all that rosy. Limoneira's EPS has fallen by approximately 51% per year during the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

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. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Limoneira (of which 1 makes us a bit uncomfortable!) you should know about. We have also put together a list of global stocks with a solid dividend.

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