Investors who want to cash in on Lake Shore Bancorp Inc’s (NASDAQ:LSBK) upcoming dividend of US$0.10 per share have only 4 days left to buy the shares before its ex-dividend date, 05 November 2018, in time for dividends payable on the 19 November 2018. Is this future income a persuasive enough catalyst for investors to think about Lake Shore Bancorp 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.
How I analyze a dividend stock
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?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- 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?
Does Lake Shore Bancorp pass our checks?
The company currently pays out 69% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.
Relative to peers, Lake Shore Bancorp generates a yield of 2.5%, which is on the low-side for Mortgage stocks.
Taking all the above into account, Lake Shore Bancorp is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. Below, I’ve compiled three important aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for LSBK’s future growth? Take a look at our free research report of analyst consensus for LSBK’s outlook.
- Valuation: What is LSBK worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether LSBK is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past 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. For errors that warrant correction please contact the editor at firstname.lastname@example.org.