Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that LeMaitre Vascular, Inc. (NASDAQ:LMAT) is about to go ex-dividend in just four days. Investors can purchase shares before the 18th of November in order to be eligible for this dividend, which will be paid on the 3rd of December.
LeMaitre Vascular's next dividend payment will be US$0.095 per share. Last year, in total, the company distributed US$0.38 to shareholders. Based on the last year's worth of payments, LeMaitre Vascular has a trailing yield of 1.0% on the current stock price of $36.94. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether LeMaitre Vascular can afford its dividend, and if the dividend could grow.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately LeMaitre Vascular's payout ratio is modest, at just 40% of profit. A useful secondary check can be to evaluate whether LeMaitre Vascular generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 32% of the free cash flow it generated, which is a comfortable payout ratio.
It's positive to see that LeMaitre Vascular's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see LeMaitre Vascular's earnings have been skyrocketing, up 32% per annum for the past five years. LeMaitre Vascular is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, LeMaitre Vascular has lifted its dividend by approximately 17% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
Is LeMaitre Vascular an attractive dividend stock, or better left on the shelf? We love that LeMaitre Vascular is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. Overall we think this is an attractive combination and worthy of further research.
Curious what other investors think of LeMaitre Vascular? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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.
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