Lennar Corporation (NYSE:LEN) stock is about to trade ex-dividend in 4 days time. You can purchase shares before the 23rd of January in order to receive the dividend, which the company will pay on the 7th of February.
Lennar's next dividend payment will be US$0.13 per share. Last year, in total, the company distributed US$0.50 to shareholders. Based on the last year's worth of payments, Lennar stock has a trailing yield of around 0.8% on the current share price of $63.09. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Lennar has a low and conservative payout ratio of just 2.8% of its income after tax.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Lennar's earnings per share have been growing at 14% a year for the past five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last ten years, Lennar has lifted its dividend by approximately 12% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
From a dividend perspective, should investors buy or avoid Lennar? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. We think this is a pretty attractive combination, and would be interested in investigating Lennar more closely.
Ever wonder what the future holds for Lennar? See what the 14 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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