Laurentian Bank of Canada (TSE: LB) has announced that it will pay a dividend of C $ 0.40 per share on November 1. Based on this payment, the dividend yield will be 3.9%, which is fairly typical for the industry.
See our latest analysis for Laurentian Bank of Canada
Laurentian Bank of Canada dividend is well covered by earnings
We like a dividend to be consistent over the long term, so it’s important to check if it’s sustainable. Before making this announcement, Laurentian Bank of Canada was easily earning enough to cover the dividend. As a result, much of what she earned was reinvested in the business.
Over the next year, EPS is expected to increase 1.7%. If the dividend continues on this path, the payout ratio could reach 37% by next year, which we believe may be quite sustainable going forward.
Although the company has a long history of dividends, it has been cut at least once in the past 10 years. The first annual payment in the last 10 years was C $ 1.56 in 2011, and the payment for the most recent year was C $ 1.60. Its dividends have grown by less than 1% per year during this period. It’s good to see modest dividend growth, but we believe this is offset by historic reductions in payments. It is difficult to live on dividend income if the company’s profits are not consistent.
Laurentian Bank of Canada may struggle to increase dividend
Since the dividend has been reduced in the past, we need to check if the profits are increasing and if this could lead to higher dividends in the future. Earnings per share climbed upward to 4.0% per year. While Laurentian Bank of Canada struggles to find viable investments, it still has the option of increasing its payout ratio to pay more to shareholders.
Our thoughts on the Laurentian Bank of Canada dividend
Overall, a consistent dividend is a good thing, and we believe that Laurentian Bank of Canada has the capacity to continue on this path in the future. The payout ratio looks good, but unfortunately the company’s dividend record isn’t stellar. It looks like a good dividend stock going forward, but we note that the payout ratio has been at higher levels in the past so it could happen again.
Market movements testify to the high value of a coherent dividend policy compared to a more unpredictable one. At the same time, there are other factors that our readers should be aware of before investing any capital in a stock. For example, we have selected 1 warning sign for the Laurentian Bank of Canada that investors should consider. Looking for more high yield dividend ideas? Try our organized list of big dividend payers.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.
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