Shares of Louisiana-Pacific Corporation (NYSE:LPX) will begin trading ex-dividend in 3 days. To qualify for the dividend check of $0.13 per share, investors must have owned the shares prior to 17 May 2018, which is the last day the company’s management will finalize their list of shareholders to which they will send dividend payments. Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let’s take a look at Louisiana-Pacific’s most recent financial data to examine its dividend characteristics in more detail. See our latest analysis for Louisiana-Pacific
5 questions to ask before buying a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is it paying an annual yield above 75% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has the amount of dividend per share grown over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How does Louisiana-Pacific fare?
The current trailing twelve-month payout ratio for the stock is 4.36%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 20.76%, leading to a dividend yield of around 1.99%. However, EPS is forecasted to fall to $2.67 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income. If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Dividend payments from Louisiana-Pacific have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. These characteristics do not bode well for income investors seeking reliable stream of dividends. In terms of its peers, Louisiana-Pacific has a yield of 1.87%, which is on the low-side for Forestry stocks.
If Louisiana-Pacific is in your portfolio for cash-generating reasons, there may be better alternatives out there. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three pertinent aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for LPX’s future growth? Take a look at our free research report of analyst consensus for LPX’s outlook.
- Valuation: What is LPX worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether LPX is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.