Should Income Investors Buy LPL Financial Holdings Inc (LPLA) Before Its Ex-Dividend?
Have you been waiting for LPL Financial Holdings Inc’s (NASDAQ:LPLA) upcoming dividend of $0.25 per share? Then you only have to wait 3 more days before the stock pays out on 27 November 2017, and starts trading ex-dividend on the 08 November 2017. Is this future income a persuasive enough catalyst for investors to think about LPLA as an investment today? Below, I’m going to look at the latest data and analyze the stock and its dividend property in further detail. View our latest analysis for LPL Financial Holdings
Here’s how I find good dividend stocks
If you are a dividend investor, you should always assess these five key metrics:
Is their annual yield among the top 25% of dividend payers?
Has it paid dividend every year without dramatically reducing payout in the past?
Has dividend per share risen in the past couple of years?
Is its earnings sufficient to payout dividend at the current rate?
Will it be able to continue to payout at the current rate in the future?
How well does LPL Financial Holdings fit our criteria?
LPL Financial Holdings has a payout ratio of 41.49%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 26.56% leading to a dividend yield of 2.09%. Furthermore, EPS should increase to $2.98. This means the company should be able to continue to payout dividends. If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Unfortunately, it is really too early to view LPL Financial Holdings as a dividend investment. It has only been consistently paying dividends for 6 years, however, standard practice for reliable payers is to look for a 10-year minimum track record. Relative to peers, LPL Financial Holdings produces a yield of 2.00%, which is high for capital markets stocks but still below the low risk savings rate.
What this means for you:
Are you a shareholder? You may be wondering why LPL Financial Holdings is paying out dividends at all, instead of re-investing into the business to generate higher cash flows in the future. It may be valuable exploring other dividend stocks as alternatives to LPLA or even look at high-growth stocks to supplement your steady income stocks. I recommend continuing your research by checking out my interactive free list of dividend rockstars as well as high-growth stocks to potentially add to your holdings.
Are you a potential investor? After digging a little deeper into LPLA’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. But if you are not exclusively a dividend investor, LPLA could still be an interesting investment opportunity. As always, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Check our latest free fundmental analysis to explore other aspects of LPLA.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
