Readers hoping to buy The Estée Lauder Companies Inc. (NYSE:EL) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You will need to purchase shares before the 29th of August to receive the dividend, which will be paid on the 16th of September.
Estée Lauder Companies's next dividend payment will be US$0.43 per share. Last year, in total, the company distributed US$1.72 to shareholders. Calculating the last year's worth of payments shows that Estée Lauder Companies has a trailing yield of 0.9% on the current share price of $197.15. If you buy this business for its dividend, you should have an idea of whether Estée Lauder Companies's dividend is reliable and sustainable. As a result, readers should always check whether Estée Lauder Companies has been able to grow its dividends, or if the dividend might be cut.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Estée Lauder Companies paid out a comfortable 34% of its profit last year.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Estée Lauder Companies earnings per share are up 9.5% per annum over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Estée Lauder Companies has lifted its dividend by approximately 20% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
The Bottom Line
Is Estée Lauder Companies worth buying for its dividend? Earnings per share have been growing moderately, and Estée Lauder Companies is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Estée Lauder Companies is halfway there. Estée Lauder Companies looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
Wondering what the future holds for Estée Lauder Companies? See what the 22 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.