In This Article:
Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. In the past 10 years London City Equities Limited (ASX:LCE) has returned an average of 4.00% per year to investors in the form of dividend payouts. Does London City Equities tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. See our latest analysis for London City Equities
How I analyze a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
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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 risen in the past couple of years?
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Is it able to pay the current rate of dividends from its earnings?
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Will it be able to continue to payout at the current rate in the future?
Does London City Equities pass our checks?
The company currently pays out 188.25% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is not sufficiently covered by its earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward. If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. LCE has increased its DPS from A$0.01 to A$0.01 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock. In terms of its peers, London City Equities produces a yield of 3.35%, which is on the low-side for Diversified Financial stocks.
Next Steps:
If London City Equities is in your portfolio for cash-generating reasons, there may be better alternatives out there. 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, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I’ve put together three important factors you should look at:
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Historical Performance: What has LCE’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
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Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on London City Equities’s board and the CEO’s back ground.
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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 pass 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.