Stock Analysis

Lincoln National (NYSE:LNC) Is Paying Out A Dividend Of $0.45

NYSE:LNC
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Lincoln National Corporation (NYSE:LNC) has announced that it will pay a dividend of $0.45 per share on the 1st of November. The dividend yield will be 7.1% based on this payment which is still above the industry average.

View our latest analysis for Lincoln National

Lincoln National's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Even though Lincoln National isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

According to analysts, EPS should be several times higher next year. If the dividend continues along recent trends, we estimate the payout ratio will be 1.2%, so there isn't too much pressure on the dividend.

historic-dividend
NYSE:LNC Historic Dividend August 28th 2023

Lincoln National Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2013, the dividend has gone from $0.48 total annually to $1.80. This means that it has been growing its distributions at 14% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Has Limited Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. Over the past five years, it looks as though Lincoln National's EPS has declined at around 41% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Lincoln National's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Lincoln National that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.