In This Article:
Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Recently, Luxfer Holdings PLC (NYSE:LXFR) has returned an average of 4.00% per year to shareholders in terms of dividend yield. Let’s dig deeper into whether Luxfer Holdings should have a place in your portfolio. Check out our latest analysis for Luxfer Holdings
5 checks you should do on a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
-
Is it paying an annual yield above 75% of dividend payers?
-
Has it paid dividend every year without dramatically reducing payout in the past?
-
Has it increased its dividend per share amount over the past?
-
Can it afford to pay the current rate of dividends from its earnings?
-
Will it be able to continue to payout at the current rate in the future?
Does Luxfer Holdings pass our checks?
The current trailing twelve-month payout ratio for LXFR is 115.05%, 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. Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. The reality is that it is too early to consider Luxfer Holdings as a dividend investment. It has only been paying out dividend for the past one year. Generally, the rule of thumb for determining whether a stock is a reliable dividend payer is that it should be consistently paying dividends for the past 10 years or more. Clearly there’s a long road ahead before we can ascertain whether LXFR one as a stable dividend player. Compared to its peers, Luxfer Holdings produces a yield of 3.52%, which is high for Machinery stocks but still below the market’s top dividend payers.
Next Steps:
Now you know to keep in mind the reason why investors should be careful investing in Luxfer Holdings for the dividend. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three essential aspects you should further examine: