Yahoo Finance Do These 3 Checks Before Buying LifeWorks Inc. (TSE:LWRK) For Its Upcoming Dividend
Readers hoping to buy LifeWorks Inc. (TSE:LWRK) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Thus, you can purchase LifeWorks' shares before the 25th of February in order to receive the dividend, which the company will pay on the 15th of March.
The company's next dividend payment will be CA$0.065 per share, on the back of last year when the company paid a total of CA$0.78 to shareholders. Based on the last year's worth of payments, LifeWorks stock has a trailing yield of around 2.8% on the current share price of CA$27.46. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
View our latest analysis for LifeWorks
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. LifeWorks lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If LifeWorks 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. Dividends consumed 72% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. LifeWorks was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. LifeWorks's dividend payments are effectively flat on where they were 10 years ago. If a company's dividend stays flat while earnings are in decline, this is typically a sign that it is paying out a larger percentage of its earnings. This can become unsustainable if earnings fall far enough.
We update our analysis on LifeWorks every 24 hours, so you can always get the latest insights on its financial health, here.
The Bottom Line
Is LifeWorks worth buying for its dividend? It's hard to get used to LifeWorks paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.
With that being said, if you're still considering LifeWorks as an investment, you'll find it beneficial to know what risks this stock is facing. For example, LifeWorks has 3 warning signs (and 1 which is potentially serious) we think you should know about.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.
