Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Luther Burbank Corporation (NASDAQ:LBC) is about to trade ex-dividend in the next 4 days. Ex-dividend means that investors that purchase the stock on or after the 6th of August will not receive this dividend, which will be paid on the 17th of August.
Luther Burbank's next dividend payment will be US$0.058 per share, on the back of last year when the company paid a total of US$0.23 to shareholders. Based on the last year's worth of payments, Luther Burbank has a trailing yield of 2.4% on the current stock price of $9.57. If you buy this business for its dividend, you should have an idea of whether Luther Burbank's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Luther Burbank paying out a modest 30% of its earnings.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. That explains why we're not overly excited about Luther Burbank's flat earnings over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. It looks like the Luther Burbank dividends are largely the same as they were three years ago.
To Sum It Up
Should investors buy Luther Burbank for the upcoming dividend? Luther Burbank's earnings per share have not grown at all in recent years, although we like that it is paying out a low percentage of its earnings. In sum this is a middling combination, and we find it hard to get excited about the company from a dividend perspective.
If you're not too concerned about Luther Burbank's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. Case in point: We've spotted 1 warning sign for Luther Burbank you should be aware of.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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. 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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