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

Lincoln National Corporation (NYSE:LNC) will pay a dividend of $0.45 on the 3rd of February. Based on this payment, the dividend yield on the company's stock will be 5.1%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Lincoln National

Lincoln National's Projected Earnings Seem Likely To Cover Future Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before this announcement, Lincoln National was paying out 117% of what it was earning, and not generating any free cash flows either. This high of a dividend payment could start to put pressure on the balance sheet in the future.

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 22%, which would make us comfortable with the dividend's sustainability, despite the levels currently being elevated.

Lincoln National Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the dividend has gone from $0.64 total annually to $1.80. This means that it has been growing its distributions at 11% 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 who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. Lincoln National's earnings per share has shrunk at 18% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

The Dividend Could Prove To Be Unreliable

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. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We don't think Lincoln National is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 3 warning signs for Lincoln National (of which 1 is a bit concerning!) you should know about. Is Lincoln National 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.