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We Wouldn't Be Too Quick To Buy Lifetime Brands, Inc. (NASDAQ:LCUT) Before It Goes Ex-Dividend

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Simply Wall St
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Lifetime Brands, Inc. (NASDAQ:LCUT) stock is about to trade ex-dividend in 4 days time. Investors can purchase shares before the 30th of January in order to be eligible for this dividend, which will be paid on the 14th of February.

Lifetime Brands's next dividend payment will be US$0.043 per share. Last year, in total, the company distributed US$0.17 to shareholders. Based on the last year's worth of payments, Lifetime Brands stock has a trailing yield of around 2.5% on the current share price of $6.9. 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 Lifetime Brands can afford its dividend, and if the dividend could grow.

View our latest analysis for Lifetime Brands

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Lifetime Brands paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If Lifetime Brands didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. Lifetime Brands paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

NasdaqGS:LCUT Historical Dividend Yield, January 25th 2020
NasdaqGS:LCUT Historical Dividend Yield, January 25th 2020

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. Lifetime Brands reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, nine years ago, Lifetime Brands has lifted its dividend by approximately 6.1% a year on average.

Get our latest analysis on Lifetime Brands's balance sheet health here.

Final Takeaway

From a dividend perspective, should investors buy or avoid Lifetime Brands? We're a bit uncomfortable with it paying a dividend while being loss-making, especially given that the dividend was not well covered by free cash flow. Bottom line: Lifetime Brands has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

Wondering what the future holds for Lifetime Brands? See what the two 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 editorial-team@simplywallst.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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.