Luxfer Holdings (NYSE:LXFR) Will Pay A Dividend Of US$0.13
The board of Luxfer Holdings PLC (NYSE:LXFR) has announced that it will pay a dividend of US$0.13 per share on the 3rd of August. Based on this payment, the dividend yield on the company's stock will be 3.3%, which is an attractive boost to shareholder returns.
View our latest analysis for Luxfer Holdings
Luxfer Holdings' Dividend Is Well Covered By Earnings
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Luxfer Holdings was earning enough to cover the dividend, but it wasn't generating any free cash flows. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.
Over the next year, EPS is forecast to expand by 24.7%. If the dividend continues on this path, the payout ratio could be 41% by next year, which we think can be pretty sustainable going forward.
Luxfer Holdings Is Still Building Its Track Record
Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The dividend has gone from US$0.50 in 2017 to the most recent annual payment of US$0.52. Dividend payments have grown at less than 1% a year over this period. Luxfer Holdings hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.
Luxfer Holdings Could Grow Its Dividend
Investors could be attracted to the stock based on the quality of its payment history. Luxfer Holdings has impressed us by growing EPS at 6.6% per year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.
Our Thoughts On Luxfer Holdings' Dividend
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Luxfer Holdings is a great stock to add to your portfolio if income is your focus.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Luxfer Holdings that investors need to be conscious of moving forward. Is Luxfer Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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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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