Over the past 10 years Laurentian Bank of Canada (TSE:LB) has grown its dividend payouts from CA$1.36 to CA$2.64. With a market cap of CA$1.8b, Laurentian Bank of Canada pays out 64% of its earnings, leading to a 6.1% yield. Let me elaborate on you why the stock stands out for income investors like myself.
What Is A Dividend Rock Star?
It is a stock that pays a stable and consistent dividend, having done so reliably for the past decade with the expectation of this continuing into the future. More specifically:
- Its annual yield is among the top 25% of dividend payers
- It consistently pays out dividend without missing a payment or significantly cutting payout
- Its has increased its dividend per share amount over the past
- It can afford to pay the current rate of dividends from its earnings
- It is able to continue to payout at the current rate in the future
High Yield And Dependable
Laurentian Bank of Canada currently yields 6.1%, which is high for Banks stocks. But the real reason Laurentian Bank of Canada stands out is because it has a proven track record of continuously paying out this level of dividends, from earnings, to shareholders and can be expected to continue paying in the future. This is a highly desirable trait for a stock holding if you're investor who wants a robust cash inflow from your portfolio over a long period of time.
Reliability 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 LB it has increased its DPS from CA$1.36 to CA$2.64 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock.
The current trailing twelve-month payout ratio for the stock is 64%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 55% which, assuming the share price stays the same, leads to a dividend yield of 6.2%. However, EPS should increase to CA$4.5, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
There aren't many other stocks out there with the same track record as Laurentian Bank of Canada, so I would certainly recommend further examining the stock if its dividend characteristics appeal to you. However, given 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. There are three key factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for LB’s future growth? Take a look at our free research report of analyst consensus for LB’s outlook.
- Valuation: What is LB 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 LB is currently mispriced by the market.
- Other Dividend Rockstars: Are there strong dividend payers with better 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 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.