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LifeWorks Inc. (TSE:LWRK) has announced that it will pay a dividend of CA$0.065 per share on the 15th of November. This means the annual payment is 2.4% of the current stock price, which is above the average for the industry.
LifeWorks Might Find It Hard To Continue The Dividend
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. LifeWorks is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.
Over the next year, EPS might fall by 5.0% based on recent performance. While this means that the company will be unprofitable, we generally believe cash flows are more important, and the current cash payout ratio is quite healthy, which gives us comfort.
LifeWorks Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2011, the dividend has gone from CA$0.94 to CA$0.78. Doing the maths, this is a decline of about 1.9% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
Dividend Growth May Be Hard To Come By
Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. LifeWorks has seen earnings per share falling at 5.0% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about LifeWorks' payments, as there could be some issues with sustaining them into the future. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. Overall, we don't think this company has the makings of a good income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 3 warning signs for LifeWorks (of which 1 is a bit concerning!) you should know about. We have also put together a list of global stocks with a solid dividend.
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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