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The board of Limoneira Company (NASDAQ:LMNR) has announced that it will pay a dividend on the 15th of January, with investors receiving $0.075 per share. The dividend yield is 1.1% based on this payment, which is a little bit low compared to the other companies in the industry.
See our latest analysis for Limoneira
Estimates Indicate Limoneira's Could Struggle to Maintain Dividend Payments In The Future
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Based on the last payment, earnings were actually smaller than the dividend, and the company was actually spending more cash than it was making. Paying out such a large dividend compared to earnings while also not generating any free cash flow would definitely be difficult to keep up.
Over the next year, EPS is forecast to fall by 36.2%. If the dividend continues along recent trends, we estimate the payout ratio could reach 164%, which could put the dividend in jeopardy if the company's earnings don't improve.
Limoneira Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was $0.15, compared to the most recent full-year payment of $0.30. This works out to be a compound annual growth rate (CAGR) of approximately 7.2% a year over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.
Dividend Growth Could Be Constrained
Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Limoneira has been growing its earnings per share at 45% a year over the past five years. Although earnings per share is up nicely Limoneira is paying out 96% of its earnings as dividends, which we feel is borderline unsustainable without extenuating circumstances.
Limoneira's Dividend Doesn't Look Sustainable
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would be a touch cautious of relying on this stock primarily for the dividend income.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for Limoneira you should be aware of, and 1 of them doesn't sit too well with us. Is Limoneira not quite the opportunity you were looking for? Why not check out our selection of top 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.