Shares of Lancaster Colony Corporation (NASDAQ:LANC) will begin trading ex-dividend in 3 days. To qualify for the dividend check of US$0.65 per share, investors must have owned the shares prior to 07 March 2019, which is the last day the company’s management will finalize their list of shareholders to which they will send dividend payments. Is this future income a persuasive enough catalyst for investors to think about Lancaster Colony 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
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is it paying an annual yield above 75% of dividend payers?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has dividend per share amount increased over the past?
- Does earnings amply cover its dividend payments?
- Will it be able to continue to payout at the current rate in the future?
How does Lancaster Colony fare?
Lancaster Colony has a trailing twelve-month payout ratio of 46%, which means that the dividend is 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.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. In the case of LANC it has increased its DPS from $1.14 to $2.6 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes LANC a true dividend rockstar.
In terms of its peers, Lancaster Colony produces a yield of 1.7%, which is on the low-side for Food stocks.
Keeping in mind the dividend characteristics above, Lancaster Colony is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I’ve put together three pertinent factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for LANC’s future growth? Take a look at our free research report of analyst consensus for LANC’s outlook.
- Valuation: What is LANC 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 LANC is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
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 email@example.com. 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.