Yahoo Finance Should Lucara Diamond Corp (TSE:LUC) Be Part Of Your Dividend Portfolio?
Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Lucara Diamond Corp (TSE:LUC) has recently paid dividends to shareholders, and currently yields 4.5%. Let’s dig deeper into whether Lucara Diamond should have a place in your portfolio.
Check out our latest analysis for Lucara Diamond
5 checks you should use to assess 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 it consistently paid a stable dividend without missing a payment or drastically cutting payout?
Has it increased its dividend per share amount over the past?
Is is able to pay the current rate of dividends from its earnings?
Will it be able to continue to payout at the current rate in the future?
How does Lucara Diamond fare?
Lucara Diamond has a trailing twelve-month payout ratio of 65%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 54%, leading to a dividend yield of around 4.9%. However, EPS should increase to $0.12, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. The reality is that it is too early to consider 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.
In terms of its peers, Lucara Diamond has a yield of 4.5%, 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. There are three pertinent factors you should further research:
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.
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.
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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
