Yahoo Finance There's A Lot To Like About Loblaw Companies' (TSE:L) Upcoming CA$0.513 Dividend
Loblaw Companies Limited (TSE:L) stock is about to trade ex-dividend in 4 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Loblaw Companies investors that purchase the stock on or after the 14th of June will not receive the dividend, which will be paid on the 1st of July.
The company's next dividend payment will be CA$0.513 per share, and in the last 12 months, the company paid a total of CA$1.78 per share. Last year's total dividend payments show that Loblaw Companies has a trailing yield of 1.3% on the current share price of CA$160.93. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
Check out our latest analysis for Loblaw Companies
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Loblaw Companies paid out a comfortable 26% of its profit last year. A useful secondary check can be to evaluate whether Loblaw Companies generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 16% of its cash flow last year.
It's positive to see that Loblaw Companies's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Loblaw Companies's earnings have been skyrocketing, up 30% per annum for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Loblaw Companies has lifted its dividend by approximately 7.9% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
Final Takeaway
Should investors buy Loblaw Companies for the upcoming dividend? Loblaw Companies has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. It's a promising combination that should mark this company worthy of closer attention.
On that note, you'll want to research what risks Loblaw Companies is facing. To help with this, we've discovered 2 warning signs for Loblaw Companies (1 shouldn't be ignored!) that you ought to be aware of before buying the shares.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.
