Lear Corp's Dividend Analysis
Investigating the Sustainability of Lear Corp's Dividend Payments
Lear Corp(NYSE:LEA) recently announced a dividend of $0.77 per share, payable on 2023-12-26, with the ex-dividend date set for 2023-12-05. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Lear Corp's dividend performance and assess its sustainability.
What Does Lear Corp Do?
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Lear designs, develops, and manufactures automotive seating and electrical systems and components. Seating components include frames and mechanisms, covers (leather and woven fabric), seat heating and cooling, foam, and headrests. Automotive electrical distribution and connection systems and electronic systems include wiring harnesses, terminals and connectors, on-board battery chargers, high-voltage battery management systems, high-voltage power distribution systems, domain controllers, telematics control units, gateway modules, vehicle positioning for automated and autonomous driving, embedded control software, cloud and mobile device software and services, and cybersecurity. Lear Corp's largest customer and regional market is GM and North America at 20% and 44% of 2022 revenue, respectively.
A Glimpse at Lear Corp's Dividend History
Lear Corp has maintained a consistent dividend payment record since 2011. Dividends are currently distributed on a quarterly basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Lear Corp's Dividend Yield and Growth
As of today, Lear Corp currently has a 12-month trailing dividend yield of 2.26% and a 12-month forward dividend yield of 2.26%. This suggests an expectation of same dividend payments over the next 12 months. Over the past three years, Lear Corp's annual dividend growth rate was 0.90%. Extended to a five-year horizon, this rate decreased to -0.80% per year. And over the past decade, Lear Corp's annual dividends per share growth rate stands at an impressive 15.80%.
Based on Lear Corp's dividend yield and five-year growth rate, the 5-year yield on cost of Lear Corp stock as of today is approximately 2.17%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-09-30, Lear Corp's dividend payout ratio is 0.33.
Lear Corp's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Lear Corp's profitability 8 out of 10 as of 2023-09-30, suggesting good profitability prospects. The company has reported positive net income for each year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Lear Corp's growth rank of 8 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and Lear Corp's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Lear Corp's revenue has increased by approximately 2.90% per year on average, a rate that underperforms approximately 61.54% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Lear Corp's earnings increased by approximately -24.60% per year on average, a rate that underperforms approximately 83.4% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of -26.50%, which underperforms approximately 94.07% of global competitors.
Next Steps
In conclusion, Lear Corp's consistent dividend payments, modest dividend growth rate, manageable payout ratio, and strong profitability rank paint a picture of a reliable dividend-paying stock. However, the growth metrics suggest that there may be challenges ahead. The company's revenue growth is lagging behind a significant portion of its competitors, and its earnings and EBITDA growth rates have been underperforming. Investors should weigh these factors carefully when considering Lear Corp as a potential addition to their dividend portfolios. Will Lear Corp's strategic initiatives and market position allow it to overcome these growth challenges and continue to reward its shareholders with sustainable dividends? This is a question value investors must ponder as they analyze the company's long-term prospects.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
