Readers wishing to buy L’Occitane International SA (HKG: 973) for its dividend will have to make its move shortly, as the stock is about to trade off dividend. Typically, the ex-dividend date is one business day prior to the record date which is the date a company determines which shareholders are eligible to receive a dividend. The ex-dividend date is important because the settlement process involves two full business days. So if you miss this date, you would not appear on the company’s books on the date of registration. This means that you will have to buy shares of L’Occitane International before October 5 to receive the dividend, which will be paid on October 22.
The company’s future dividend is € 0.037 per share, following the last 12 months, when the company has distributed a total of € 0.037 per share to shareholders. Based on the value of last year’s payouts, L’Occitane International stock has a rolling yield of around 1.3% on the current stock price of HK $ 26.25. Dividends are a major contributor to returns on investment for long-term holders, but only if the dividend continues to be paid. It is therefore necessary to check whether dividend payments are covered and whether profits are growing.
See our latest review for L’Occitane International
Dividends are usually paid out of the company’s profits, so if a company pays more than it earned, its dividend is usually at risk of being reduced. L’Occitane International paid a comfortable 35% of its profit last year. Yet cash flow is still more important than earnings in valuing a dividend, so we need to see if the company has generated enough cash to pay for its distribution. The good news is that she has only paid out 8.2% of her free cash flow in the past year.
It is encouraging to see that the dividend is covered by both earnings and cash flow. This usually suggests that the dividend is sustainable, as long as profits don’t drop sharply.
Click here to view the company’s payout ratio, as well as analysts’ estimates of its future dividends.
Have profits and dividends increased?
Companies with consistently rising earnings per share usually make the best dividend-paying stocks because they generally find it easier to raise dividends per share. If profits fall enough, the company could be forced to cut its dividend. From this perspective, we are encouraged by the sustained growth of L’Occitane International, with earnings per share up by 7.0% on average over the last five years. The company keeps more than half of its profits within the company and has increased its profits at a decent rate. Organizations that reinvest heavily in themselves typically get stronger over time, which can bring compelling benefits like higher profits and dividends.
Most investors will primarily assess a company’s dividend prospects by checking the historical rate of dividend growth. L’Occitane International has achieved an average annual increase of 11% per year in its dividend, based on the last 10 years of dividend payments. It is encouraging to see the company raising its dividends as profits rise, suggesting at least some corporate interest in rewarding shareholders.
Is L’Occitane International worth buying for its dividend? Earnings per share growth has increased somewhat and L’Occitane International pays less than half of its earnings and cash flow as dividends. This is interesting for several reasons, as it suggests that management may be reinvesting heavily in the company, but it also helps to increase the dividend over time. It might be nice to see profits grow faster, but L’Occitane International is careful with its dividend distributions and could still perform reasonably well over the long term. There is a lot to like about L’Occitane International, and we would prioritize taking a closer look.
In light of this, while L’Occitane International has an attractive dividend, it is worth knowing the risks associated with this stock. In terms of investment risks, we have identified 2 warning signs with L’Occitane International and understanding them should be part of your investment process.
However, we don’t recommend simply buying the first dividend stock you see. Here is a list of interesting dividend paying stocks with a yield above 2% and a dividend coming soon.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.
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