Libstar Holdings (JSE:LBR) Will Pay A Dividend Of ZAR0.15

Libstar Holdings Limited (JSE:LBR) will pay a dividend of ZAR0.15 on the 14th of April. This means that the annual payment will be 4.6% of the current stock price, which is in line with the average for the industry.

Libstar Holdings Might Find It Hard To Continue The Dividend

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before making this announcement, Libstar Holdings was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS might fall by 30.8% based on recent performance. This means that the company won't turn a profit over the next year, but with healthy cash flows at the moment the dividend could still be okay to continue.

Check out our latest analysis for Libstar Holdings

Libstar Holdings' Dividend Has Lacked Consistency

Libstar Holdings has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. Since 2019, the dividend has gone from ZAR0.22 total annually to ZAR0.15. Doing the maths, this is a decline of about 6.2% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Has Limited Growth Potential

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Over the past five years, it looks as though Libstar Holdings' EPS has declined at around 31% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

In Summary

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 unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Libstar Holdings that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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