Does it make sense to buy LifeVantage Corporation (NASDAQ:LFVN) before it goes ex-dividend?
Looks like LifeVantage Company (NASDAQ:LFVN) is set to go ex-dividend in the next 4 days. The ex-dividend date occurs one day before the record date which is the day shareholders must be on the books of the company to receive a dividend. It is important to know the ex-dividend date, because any trade in the stock must have settled by the record date. This means you will need to buy LifeVantage shares before September 1 to receive the dividend, which will be paid on September 15.
The upcoming dividend for LifeVantage is $0.03 per share. If you’re buying this company for its dividend, you should have some idea of the reliability and sustainability of LifeVantage’s dividend. We need to see if the dividend is covered by earnings and if it increases.
Check out our latest analysis for LifeVantage
Dividends are usually paid out of company profits. If a company pays out more dividends than it earns in profits, then the dividend could be unsustainable. LifeVantage has a low and conservative payout ratio of just 12% of its after-tax income. That said, even very profitable companies can sometimes not generate enough cash to pay the dividend, so we should always check if the dividend is covered by cash flow. Fortunately, it only paid out 5.9% of its free cash flow last year.
It is encouraging to see that the dividend is covered by both earnings and cash flow. This generally suggests that the dividend is sustainable, as long as earnings don’t drop precipitously.
Click here to see how much of his profits LifeVantage has paid out over the past 12 months.
Have earnings and dividends increased?
Stocks of companies that generate sustainable earnings growth often offer the best dividend prospects because it is easier to increase the dividend when earnings increase. If earnings fall enough, the company could be forced to cut its dividend. For this reason, we are pleased to see that LifeVantage’s earnings per share have grown 16% annually over the past five years. Earnings per share are growing rapidly and the company keeps more than half of its profits with the company; an attractive combination that could suggest the company is focusing on reinvestment to further boost earnings. Fast-growing companies that reinvest heavily are attractive from a dividend perspective, especially since they can often increase the payout ratio later.
This is the first year that LifeVantage has paid a dividend, so it doesn’t yet have much history to compare itself to.
Is LifeVantage an attractive dividend-paying stock, or is it better left on the shelf? We like that LifeVantage is increasing its earnings per share while simultaneously paying out a small percentage of its earnings and cash flow. These characteristics suggest that the company is reinvesting in the growth of its business, while the conservative payout ratio also implies a reduced risk of dividend reduction in the future. It’s a promising combination that should mark this company worthy of attention.
In light of this, although LifeVantage has an attractive dividend, it is worth knowing the risks associated with this stock. Every business has risks, and we’ve spotted 4 Warning Signs for LifeVantage you should know.
As a general rule, we don’t recommend simply buying the first dividend-paying stock you see. Here is a curated list of attractive stocks that are strong dividend payers.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.
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