Law Debenture (LON:LWDB) Has Affirmed Its Dividend Of £0.0725
The board of The Law Debenture Corporation p.l.c. (LON:LWDB) has announced that it will pay a dividend of £0.0725 per share on the 26th of January. This means that the annual payment will be 3.8% of the current stock price, which is in line with the average for the industry.
See our latest analysis for Law Debenture
Law Debenture's Distributions May Be Difficult To Sustain
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Law Debenture is unprofitable despite paying a dividend, and it is paying out 116% of its free cash flow. This is quite a strong warning sign that the dividend may not be sustainable.
Looking forward, earnings per share could 0.6% over the next year if the trend of the last few years can't be broken. This means the company will be unprofitable and managers could face the tough choice between continuing to pay the dividend or taking pressure off the balance sheet.
Law Debenture Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was £0.135 in 2012, and the most recent fiscal year payment was £0.29. This implies that the company grew its distributions at a yearly rate of about 7.9% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.
Dividend Growth May Be Hard To Achieve
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. Although it's important to note that Law Debenture's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.
Law Debenture's Dividend Doesn't Look Sustainable
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We would probably look elsewhere for an income investment.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 4 warning signs for Law Debenture (of which 3 are significant!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
