Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see London Stock Exchange Group plc (LON:LSEG) is about to trade ex-dividend in the next 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. Meaning, you will need to purchase London Stock Exchange Group's shares before the 18th of August to receive the dividend, which will be paid on the 20th of September.
The company's next dividend payment will be UK£0.32 per share, on the back of last year when the company paid a total of UK£0.95 to shareholders. Based on the last year's worth of payments, London Stock Exchange Group stock has a trailing yield of around 1.2% on the current share price of £81.84. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Last year London Stock Exchange Group paid out 97% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings.
When the dividend payout ratio is high, as it is in this case, the dividend is usually at greater risk of being cut in the future.
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. This is why it's a relief to see London Stock Exchange Group earnings per share are up 8.2% per annum over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, London Stock Exchange Group has increased its dividend at approximately 14% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
Has London Stock Exchange Group got what it takes to maintain its dividend payments? London Stock Exchange Group has been growing earnings per share at a reasonable rate, but over the last year its dividend was not well covered by earnings. London Stock Exchange Group doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.
Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with London Stock Exchange Group. Case in point: We've spotted 2 warning signs for London Stock Exchange Group you should be aware of.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.
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