Luther Burbank Corporation (NASDAQ:LBC) stock is about to trade ex-dividend in 4 days time. Investors can purchase shares before the 6th of February in order to be eligible for this dividend, which will be paid on the 18th of February.
Luther Burbank's next dividend payment will be US$0.058 per share, on the back of last year when the company paid a total of US$0.23 to shareholders. Looking at the last 12 months of distributions, Luther Burbank has a trailing yield of approximately 2.2% on its current stock price of $10.31. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Luther Burbank can afford its dividend, and if the dividend could grow.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see Luther Burbank paying out a modest 26% of its earnings.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. It's not encouraging to see that Luther Burbank's earnings are effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. It looks like the Luther Burbank dividends are largely the same as they were two years ago.
The Bottom Line
From a dividend perspective, should investors buy or avoid Luther Burbank? Earnings per share have been flat in recent years, although Luther Burbank reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. Luther Burbank ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
Ever wonder what the future holds for Luther Burbank? See what the three analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
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