Attention dividend hunters! LSC Communications Inc (NYSE:LKSD) will be distributing its dividend of $0.26 per share on the 02 March 2018, and will start trading ex-dividend in 2 days time on the 14 February 2018. Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let’s take a look at LSC Communications’s most recent financial data to examine its dividend characteristics in more detail. Check out our latest analysis for LSC Communications
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:
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Is it the top 25% annual dividend yield payer?
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Has it paid dividend every year without dramatically reducing payout in the past?
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Has dividend per share amount increased over the past?
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Can it afford to pay the current rate of dividends from its earnings?
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Will it have the ability to keep paying its dividends going forward?
Does LSC Communications pass our checks?
LSC Communications has a trailing twelve-month payout ratio of more than 200% of earnings, which suggests that the dividend is not well-covered by earnings by any means. In the near future, analysts are predicting a more sensible payout ratio of 49.92%, leading to a dividend yield of around 7.76%. In addition to this, EPS should increase to $1.7, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. 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 LSC Communications as a dividend investment. It has only been paying out dividend for the past one year. Generally, the rule of thumb for determining whether a stock is a reliable dividend payer is that it should be consistently paying dividends for the past 10 years or more. Clearly there’s a long road ahead before we can ascertain whether LKSD one as a stable dividend player. Compared to its peers, LSC Communications has a yield of 8.07%, which is high for Commercial Services stocks.
Next Steps:
If LSC Communications is in your portfolio for cash-generating reasons, there may be better alternatives out there. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. Below, I’ve compiled three key aspects you should look at: