LifeWorks Inc. The stock (TSE: LWRK) is set to trade off-dividend in four days. The ex-dividend date occurs one day before the registration date which is the day on which shareholders must be entered in the books of the company to receive a dividend. The ex-dividend date is important because any share transaction must have been settled before the registration date to be eligible for a dividend. So you can buy LifeWorks shares before October 28 in order to receive the dividend, which the company will pay on November 15.
The company’s next dividend payment will be C $ 0.065 per share, and over the past 12 months, the company has paid a total of C $ 0.78 per share. Calculating the value of last year’s payouts shows that LifeWorks has a rolling 2.4% return on the current stock price of C $ 31.98. We love to see companies pay a dividend, but it’s also important to make sure that laying the golden eggs doesn’t kill our goose that lays the golden eggs! So we need to determine whether LifeWorks can afford its dividend and whether the dividend could increase.
See our latest review for LifeWorks
Dividends are usually paid out of business income, so if a business pays more than it earned, its dividend is usually at risk of being reduced. LifeWorks paid a dividend last year despite being unprofitable. This may be a one-time event, but it is not a long-term sustainable situation. With the recent loss, it is important to check whether the company has generated enough cash to pay its dividend. If the cash income does not cover the dividend, the company would have to pay cash dividends to the bank or by borrowing money, which is not sustainable in the long run. Dividends consumed 61% of the company’s free cash flow last year, which is within a normal range for most dividend-paying organizations.
Click here to view the company’s payout ratio, as well as analysts’ estimates of its future dividends.
Have profits and dividends increased?
When profits decline, dividend companies become much more difficult to analyze and to safely own. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold massively at the same time. LifeWorks reported a loss last year, and the general trend suggests that its profits have also declined in recent years, which makes us wonder if the dividend is in jeopardy.
Most investors will primarily assess a company’s dividend prospects by checking the historical rate of dividend growth. LifeWorks dividend payouts per share have declined 1.9% per year on average over the past 10 years, which is not inspiring.
Remember, you can still get an overview of LifeWorks’ financial health by checking out our Financial Health visualization here.
The bottom line
Should investors buy LifeWorks for the next dividend? It’s hard to get used to LifeWorks paying a dividend despite a reported loss in the past year. However, at least the dividend was covered by free cash flow. It’s not that we think LifeWorks is a bad company, but these characteristics don’t generally lead to outstanding dividend performance.
That said, if you look at this stock without worrying too much about the dividend, you should still be aware of the risks associated with LifeWorks. Every business has risks, and we have spotted 3 warning signs for LifeWorks (1 of which should not be ignored!) that you should know.
A common investment mistake is to buy the first interesting stock you see. Here you will find a list of promising dividend paying stocks with a yield above 2% and an upcoming dividend.
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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