Is It Smart To Buy Luxfer Holdings PLC (NYSE:LXFR) Before It Goes Ex-Dividend?
It looks like Luxfer Holdings PLC (NYSE:LXFR) is about to go ex-dividend in the next 4 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase Luxfer Holdings' shares before the 13th of January in order to be eligible for the dividend, which will be paid on the 2nd of February.
The company's next dividend payment will be US$0.13 per share. Last year, in total, the company distributed US$0.50 to shareholders. Looking at the last 12 months of distributions, Luxfer Holdings has a trailing yield of approximately 2.6% on its current stock price of $19.03. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Luxfer Holdings can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Luxfer Holdings
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately Luxfer Holdings's payout ratio is modest, at just 42% of profit. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Thankfully its dividend payments took up just 35% of the free cash flow it generated, which is a comfortable payout ratio.
It's positive to see that Luxfer Holdings's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Luxfer Holdings's earnings per share have risen 15% per annum over the last five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. It looks like the Luxfer Holdings dividends are largely the same as they were four years ago.
To Sum It Up
Should investors buy Luxfer Holdings for the upcoming dividend? Luxfer Holdings has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. There's a lot to like about Luxfer Holdings, and we would prioritise taking a closer look at it.
On that note, you'll want to research what risks Luxfer Holdings is facing. Every company has risks, and we've spotted 1 warning sign for Luxfer Holdings you should know about.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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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.
