Why You Might Be Interested In LPL Financial Holdings Inc. (NASDAQ:LPLA) For Its Upcoming Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see LPL Financial Holdings Inc. (NASDAQ:LPLA) is about to trade ex-dividend in the next 4 days. You can purchase shares before the 10th of November in order to receive the dividend, which the company will pay on the 30th of November.
LPL Financial Holdings's upcoming dividend is US$0.25 a share, following on from the last 12 months, when the company distributed a total of US$1.00 per share to shareholders. Calculating the last year's worth of payments shows that LPL Financial Holdings has a trailing yield of 1.3% on the current share price of $78.45. If you buy this business for its dividend, you should have an idea of whether LPL Financial Holdings's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for LPL Financial Holdings
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. LPL Financial Holdings has a low and conservative payout ratio of just 16% of its income after tax.
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.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see LPL Financial Holdings has grown its earnings rapidly, up 28% a year for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last nine years, LPL Financial Holdings has lifted its dividend by approximately 8.5% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
Is LPL Financial Holdings an attractive dividend stock, or better left on the shelf? Companies like LPL Financial Holdings that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. We think this is a pretty attractive combination, and would be interested in investigating LPL Financial Holdings more closely.
In light of that, while LPL Financial Holdings has an appealing dividend, it's worth knowing the risks involved with this stock. For instance, we've identified 2 warning signs for LPL Financial Holdings (1 is concerning) you should be aware of.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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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