Law Debenture (LON:LWDB) Is Due To Pay A Dividend Of £0.0875
The board of The Law Debenture Corporation p.l.c. (LON:LWDB) has announced that it will pay a dividend of £0.0875 per share on the 13th of April. Based on this payment, the dividend yield will be 3.6%, which is fairly typical for the industry.
Check out our latest analysis for Law Debenture
Law Debenture's Distributions May Be Difficult To Sustain
We aren't too impressed by dividend yields unless they can be sustained over time. Law Debenture is unprofitable despite paying a dividend, and it is paying out 104% of its free cash flow. These payout levels would generally be quite difficult to keep up.
Recent, EPS has fallen by 4.7%, so this could continue over the next year. This will push the company into unprofitability, which means the managers will have to choose between suspending the dividend, or paying it out of cash reserves.
Law Debenture Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was £0.135 in 2013, and the most recent fiscal year payment was £0.305. This works out to be a compound annual growth rate (CAGR) of approximately 8.5% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.
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. Over the past five years, it looks as though Law Debenture's EPS has declined at around 4.7% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.
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. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would be a touch cautious of relying on this stock primarily for the dividend income.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 4 warning signs for Law Debenture you should be aware of, and 3 of them are potentially serious. Is Law Debenture not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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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.
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