Should Income Investors Look At L'Occitane International S.A. (HKG:973) Before Its Ex-Dividend?
L'Occitane International S.A. (HKG:973) stock is about to trade ex-dividend in 3 days time. Investors can purchase shares before the 27th of September in order to be eligible for this dividend, which will be paid on the 18th of October.
L'Occitane International's next dividend payment will be HK$0.03 per share, on the back of last year when the company paid a total of HK$0.03 to shareholders. Looking at the last 12 months of distributions, L'Occitane International has a trailing yield of approximately 1.6% on its current stock price of HK$16.2. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether L'Occitane International has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for L'Occitane International
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately L'Occitane International's payout ratio is modest, at just 37% of profit. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Over the last year it paid out 51% of its free cash flow as dividends, within the usual range for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see L'Occitane International earnings per share are up 5.9% per annum over the last five years. Decent historical earnings per share growth suggests L'Occitane International has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, eight years ago, L'Occitane International has lifted its dividend by approximately 10% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
Final Takeaway
Has L'Occitane International got what it takes to maintain its dividend payments? Earnings per share growth has been modest, and it's interesting that L'Occitane International is paying out less than half of its earnings and more than half its cash flow to shareholders in the form of dividends. In summary, it's hard to get excited about L'Occitane International from a dividend perspective.
Curious what other investors think of L'Occitane International? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
