Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Lisi S.A. (EPA:FII) is about to trade ex-dividend in the next 3 days. Ex-dividend means that investors that purchase the stock on or after the 30th of April will not receive this dividend, which will be paid on the 5th of May.
Lisi's upcoming dividend is €0.46 a share, following on from the last 12 months, when the company distributed a total of €0.46 per share to shareholders. Last year's total dividend payments show that Lisi has a trailing yield of 2.9% on the current share price of €15.66. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Lisi has been able to grow its dividends, or if the dividend might be cut.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Lisi paid out a comfortable 35% of its profit last year. A useful secondary check can be to evaluate whether Lisi generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 22% of its cash flow last year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. So we're not too excited that Lisi's earnings are down 3.3% a year over the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Lisi has delivered an average of 13% per year annual increase in its dividend, based on the past ten years of dividend payments.
To Sum It Up
Should investors buy Lisi for the upcoming dividend? Lisi has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.
On that note, you'll want to research what risks Lisi is facing. Every company has risks, and we've spotted 3 warning signs for Lisi you should know about.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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