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Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Lakeland Financial Corporation (NASDAQ:LKFN) is about to go ex-dividend in just four days. If you purchase the stock on or after the 23rd of July, you won't be eligible to receive this dividend, when it is paid on the 5th of August.
Lakeland Financial's next dividend payment will be US$0.30 per share. Last year, in total, the company distributed US$1.20 to shareholders. Calculating the last year's worth of payments shows that Lakeland Financial has a trailing yield of 2.7% on the current share price of $45.26. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately Lakeland Financial's payout ratio is modest, at just 37% of profit.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Lakeland Financial's earnings per share have been growing at 13% a year for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Lakeland Financial has delivered 11% dividend growth per year on average over the past ten years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
The Bottom Line
Is Lakeland Financial worth buying for its dividend? Companies like Lakeland Financial that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. We think this is a pretty attractive combination, and would be interested in investigating Lakeland Financial more closely.
While it's tempting to invest in Lakeland Financial for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 2 warning signs for Lakeland Financial that we strongly recommend you have a look at before investing in the company.
If you're in the market for dividend stocks, we recommend checking our list of top 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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