Readers hoping to buy Lifetime Brands, Inc. (NASDAQ:LCUT) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Lifetime Brands' shares on or after the 29th of October, you won't be eligible to receive the dividend, when it is paid on the 15th of November.

The company's next dividend payment will be US$0.043 per share. Last year, in total, the company distributed US$0.17 to shareholders. Last year's total dividend payments show that Lifetime Brands has a trailing yield of 1.0% on the current share price of $17.46. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Lifetime Brands

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Lifetime Brands has a low and conservative payout ratio of just 9.4% of its income after tax. A useful secondary check can be to evaluate whether Lifetime Brands generated enough free cash flow to afford its dividend. Fortunately, it paid out only 27% of its free cash flow in the past year.

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?

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 fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Lifetime Brands's earnings per share have risen 14% per annum over the last five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

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, 10 years ago, Lifetime Brands has lifted its dividend by approximately 5.4% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Lifetime Brands is keeping back more of its profits to grow the business.

The Bottom Line

Should investors buy Lifetime Brands for the upcoming dividend? Lifetime Brands has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. It's a promising combination that should mark this company worthy of closer attention.

So while Lifetime Brands looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example - Lifetime Brands has 1 warning sign we think you should be aware of.

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.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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