Lancashire Holdings Limited (LON:LRE) stock is about to trade ex-dividend in 3 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, Lancashire Holdings investors that purchase the stock on or after the 4th of August will not receive the dividend, which will be paid on the 2nd of September.

The company's next dividend payment will be US$0.05 per share. Last year, in total, the company distributed US$0.13 to shareholders. Based on the last year's worth of payments, Lancashire Holdings stock has a trailing yield of around 2.5% on the current share price of £4.452. If you buy this business for its dividend, you should have an idea of whether Lancashire Holdings's dividend is reliable and sustainable. So we need to investigate whether Lancashire Holdings can afford its dividend, and if the dividend could grow.

View our latest analysis for Lancashire Holdings

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Lancashire Holdings reported a loss last year, so it's not great to see that it has continued paying a dividend.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. Lancashire Holdings was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Lancashire Holdings's dividend payments per share have declined at 18% per year on average over the past 10 years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

Get our latest analysis on Lancashire Holdings's balance sheet health here.

Final Takeaway

Is Lancashire Holdings worth buying for its dividend? First, it's not great to see the company paying a dividend despite being loss-making over the last year. Worse, the general trend in its earnings looks negative in recent years. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.