Lycopodium's (ASX:LYL) Dividend Will Be Increased To A$0.45
Lycopodium Limited (ASX:LYL) has announced that it will be increasing its dividend from last year's comparable payment on the 6th of October to A$0.45. This takes the dividend yield to 8.6%, which shareholders will be pleased with.
Check out our latest analysis for Lycopodium
Lycopodium's Earnings Easily Cover The Distributions
If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last dividend, Lycopodium is earning enough to cover the payment, but then it makes up 249% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.
Over the next year, EPS could expand by 20.4% if recent trends continue. If the dividend continues on this path, the payout ratio could be 65% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the annual payment back then was A$0.33, compared to the most recent full-year payment of A$0.90. This means that it has been growing its distributions at 11% per annum over that time. Lycopodium has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.
The Dividend Looks Likely To Grow
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Lycopodium has impressed us by growing EPS at 20% per year over the past five years. Lycopodium is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.
Our Thoughts On Lycopodium's Dividend
Overall, we always like to see the dividend being raised, but we don't think Lycopodium will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Lycopodium is a great stock to add to your portfolio if income is your focus.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Lycopodium that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
