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LSI Industries Inc. (NASDAQ:LYTS) is about to trade ex-dividend in the next 4 days. Ex-dividend means that investors that purchase the stock on or after the 28th of August will not receive this dividend, which will be paid on the 8th of September.
LSI Industries's next dividend payment will be US$0.05 per share. Last year, in total, the company distributed US$0.20 to shareholders. Looking at the last 12 months of distributions, LSI Industries has a trailing yield of approximately 2.8% on its current stock price of $7.25. 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! We need to see whether the dividend is covered by earnings and if it's growing.
View our latest analysis for LSI Industries
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. LSI Industries paid out 55% of its earnings to investors last year, a normal payout level for most businesses.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, LSI Industries's earnings per share have been growing at 12% a year for the past five years. LSI Industries is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. LSI Industries's dividend payments are broadly unchanged compared to where they were 10 years ago.
The Bottom Line
Is LSI Industries an attractive dividend stock, or better left on the shelf? Earnings per share are growing at an attractive rate, and LSI Industries is paying out a bit over half its profits. Overall, LSI Industries looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
While it's tempting to invest in LSI Industries for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 2 warning signs for LSI Industries you should know about.