Yahoo Finance Latitude Group Holdings Limited (ASX:LFS) Looks Like A Good Stock, And It's Going Ex-Dividend Soon
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Latitude Group Holdings Limited (ASX:LFS) is about to go ex-dividend in just four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase Latitude Group Holdings' shares on or after the 21st of March will not receive the dividend, which will be paid on the 24th of April.
The company's next dividend payment will be AU$0.04 per share, on the back of last year when the company paid a total of AU$0.08 to shareholders. Calculating the last year's worth of payments shows that Latitude Group Holdings has a trailing yield of 6.6% on the current share price of A$1.205. 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 Latitude Group Holdings can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Latitude Group Holdings
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. Latitude Group Holdings is paying out an acceptable 51% of its profit, a common payout level among most companies.
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?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For that reason, it's encouraging to see Latitude Group Holdings's earnings over the past year have risen 30%. While we'd be remiss not to point out that a year is a very short time in dividend investing, it's an encouraging sign so far.
One year is not very long in the grand scheme of things though, so we wouldn't draw too strong a conclusion based on these results.
Latitude Group Holdings also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.
Given that Latitude Group Holdings has only been paying a dividend for a year, there's not much of a past history to draw insight from.
The Bottom Line
From a dividend perspective, should investors buy or avoid Latitude Group Holdings? Earnings per share are growing nicely, and Latitude Group Holdings is paying out a percentage of its earnings that is around the average for dividend-paying stocks. In summary, Latitude Group Holdings appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
In light of that, while Latitude Group Holdings has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 4 warning signs for Latitude Group Holdings that we strongly recommend you have a look at before investing in the company.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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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.
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