Investors who want to cash in on London City Equities’s (ASX:LCE) upcoming dividend of $0.01 per share have only 3 days left to buy the shares before its ex-dividend date, Fri 29 Sep 2017, in time for dividends payable on the Thu 12 Oct 2017. Is this future income stream a compelling catalyst for dividend investors to think about LCE as an investment today? Let’s take a look at LCE’s most recent financial data to examine its dividend characteristics in more detail.
What is the ex-dividend date?
If you purchase a stock on or after its ex-dividend date, you will not receive the next dividend payment. Instead, the seller gets the dividend. If you purchase before the ex-dividend date, you get the dividend.
See our latest analysis for LCE
Should London City Equities (LCE) be part of your dividend portfolio?
London City Equities’s payout ratio is the first thing I want to look at to assess the strength of it’s dividend yield.
Payout ratio is a measure of the portion of a company’s earnings paid out to shareholders as a dividend. So a payout ratio of 50% would mean for every $1 earnt, the stock pays out 50c as a dividend. Likewise a payout ratio of 150% means a company cannot afford to pay their dividend using just its earnings and will need to dive into their cash reserves, or worse, issue debt to pay the remaining part.
The current payout ratio for the stock is 765%, which suggests that the dividend is not well-covered by earnings by any means. Analysts have not forecast a dividends per share estimate for 3 years time, which makes it hard to determine what yield shareholders should expect to see in the future. Check out our latest analysis for London City Equities
On top of London City Equities’s payout ratio, investors should also look at the company’s track record of dividend payments over the years.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Whilst their per-share payments have increased during the past 10 years, there has been some hiccups. Shareholders would have seen a few years of reduced payments in this time.
London City Equities yields 3.929%, which is high for a financial institutions stock but still below the market’s top dividend payers.
What this means for you:
Are you a shareholder? If LCE is in your portfolio for cash-generating reasons, there may be better alternatives out there.If you’re holding LCE for other reasons, I recommend you revisit its fundamentals as well. If LCE makes up a large part of your stock portfolio, you may want to ensure strong future prospects as well.
Are you a potential investor? Taking all the above into account, London City Equities is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative.However, if you are not strictly just a dividend investor, LCE could still offer some interesting investment opportunities.As always, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment.
If you’re still interest in the company, I recommend you take a look at our
latest FREE analysis to explore what investment opportunities London City Equities may offer. If you are looking for great dividend payers I recommend you also take a look at our list of Dividend Rock Stars.
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