Should You Buy Lucara Diamond Corp (TSE:LUC) For Its Dividend?

Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Over the past 4 years, Lucara Diamond Corp (TSX:LUC) has returned an average of 3.00% per year to shareholders in terms of dividend yield. Let’s dig deeper into whether Lucara Diamond should have a place in your portfolio. View our latest analysis for Lucara Diamond

5 questions to ask before buying a dividend stock

When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:

• Is their annual yield among the top 25% of dividend payers?

• Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?

• Has it increased its dividend per share amount over the past?

• Is it able to pay the current rate of dividends from its earnings?

• Based on future earnings growth, will it be able to continue to payout dividend at the current rate?

TSX:LUC Historical Dividend Yield Jun 12th 18

How does Lucara Diamond fare?

The current trailing twelve-month payout ratio for the stock is 51.67%, which means that the dividend is covered by earnings. Going forward, analysts expect LUC’s payout to remain around the same level at 56.24% of its earnings, which leads to a dividend yield of around 5.33%. In addition to this, EPS is forecasted to fall to $0.13 in the upcoming year. If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Unfortunately, it is really too early to view Lucara Diamond as a dividend investment. It has only been consistently paying dividends for 4 years, however, standard practice for reliable payers is to look for a 10-year minimum track record. Relative to peers, Lucara Diamond has a yield of 4.81%, which is high for Metals and Mining stocks but still below the market’s top dividend payers.

Next Steps:

If you are building an income portfolio, then Lucara Diamond is a complicated choice since it has some positive aspects as well as negative ones. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. I’ve put together three fundamental factors you should further examine:

1. Future Outlook: What are well-informed industry analysts predicting for LUC’s future growth? Take a look at our free research report of analyst consensus for LUC’s outlook.

2. Valuation: What is LUC worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether LUC is currently mispriced by the market.

3. Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.