Luxfer Holdings (NYSE:LXFR) Is Paying Out A Dividend Of $0.13
The board of Luxfer Holdings PLC (NYSE:LXFR) has announced that it will pay a dividend on the 7th of February, with investors receiving $0.13 per share. This means the annual payment is 6.2% of the current stock price, which is above the average for the industry.
View our latest analysis for Luxfer Holdings
Luxfer Holdings Doesn't Earn Enough To Cover Its Payments
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, the company was paying out 139% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 75%. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.
The next 12 months is set to see EPS grow by 50.0%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 95%, which probably can't continue without putting some pressure on the balance sheet.
Luxfer Holdings Is Still Building Its Track Record
Luxfer Holdings' dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2018, the annual payment back then was $0.50, compared to the most recent full-year payment of $0.52. Dividend payments have been growing, but very slowly over the 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.
Dividend Growth Potential Is Shaky
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Luxfer Holdings' EPS has fallen by approximately 23% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.
The Dividend Could Prove To Be Unreliable
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 3 warning signs for Luxfer Holdings that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.
