Law Debenture (LON:LWDB) Has Affirmed Its Dividend Of £0.0838

The Law Debenture Corporation p.l.c. (LON:LWDB) will pay a dividend of £0.0838 on the 16th of January. This means that the annual payment will be 3.2% of the current stock price, which is in line with the average for the industry.

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Law Debenture's Projected Earnings Seem Likely To Cover Future Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, prior to this announcement, Law Debenture was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The business is earning enough to make the dividend feasible, but the cash payout ratio of 93% shows that most of the cash is going back to the shareholders, which could constrain growth prospects going forward.

Looking forward, earnings per share could rise by 17.0% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 25% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Law Debenture

Law Debenture Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the annual payment back then was £0.157, compared to the most recent full-year payment of £0.335. This works out to be a compound annual growth rate (CAGR) of approximately 7.9% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Law Debenture has grown earnings per share at 17% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On Law Debenture's Dividend

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. On the plus side, the dividend looks sustainable by most measures but it is let down by the lack of cash flows. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Law Debenture that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.