There's A Lot To Like About Lincoln Electric Holdings' (NASDAQ:LECO) Upcoming US$0.79 Dividend

It looks like Lincoln Electric Holdings, Inc. (NASDAQ:LECO) is about to go ex-dividend in the next four days. The ex-dividend date is usually set to be one business day before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Lincoln Electric Holdings' shares on or after the 31st of December will not receive the dividend, which will be paid on the 15th of January.

The company's next dividend payment will be US$0.79 per share. Last year, in total, the company distributed US$3.16 to shareholders. Based on the last year's worth of payments, Lincoln Electric Holdings stock has a trailing yield of around 1.3% on the current share price of US$245.15. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Lincoln Electric Holdings can afford its dividend, and if the dividend could grow.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Lincoln Electric Holdings paying out a modest 32% of its earnings. 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. It distributed 30% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Lincoln Electric Holdings's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

View our latest analysis for Lincoln Electric Holdings

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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Lincoln Electric Holdings's earnings per share have risen 15% per annum over the last five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Lincoln Electric Holdings has increased its dividend at approximately 11% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

Has Lincoln Electric Holdings got what it takes to maintain its dividend payments? Lincoln Electric Holdings 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. Lincoln Electric Holdings looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

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

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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.