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Sun. Jul 14th, 2024

Dividend investors: don’t be too quick to buy LCNB Corp. (NASDAQ:LCNB) for its upcoming dividend

By Vaseline May30,2024

Readers hoping to buy LCNB Corp. (NASDAQ:LCNB) for its dividend will need to take action soon as the stock is about to trade ex-dividend. The ex-dividend date is generally set one business day before the record date. This is the cut-off date on which you, as a shareholder, must be present on the company’s books in order to receive the dividend. The ex-dividend date is important because the settlement process takes two full business days. So if you miss that date, you won’t appear on the company’s books on the record date. In other words, investors can purchase LCNB shares before June 3 to qualify for the dividend, which will be paid on June 17.

The company’s next dividend payment will be $0.22 per share, following last year when the company paid a total of $0.88 to shareholders. Based on the last year’s worth of payments, LCNB stock has a rolling yield of approximately 6.4% on the current share price of US$13.85. If you buy this company for its dividend, you should have an idea of ​​whether LCNB’s dividend is reliable and sustainable. Therefore, we should always check if the dividend payments appear sustainable and if the company is growing.

Check out our latest analysis for LCNB

Dividends are typically paid out of company profits, so if a company pays out more than it earned then its dividend is usually at higher risk of being cut. Last year, LCNB paid out 99% of its earnings as dividends, which is above a level we’re comfortable with, especially if the company needs to reinvest in its business.

When the dividend payout ratio is high, as in this case, the dividend is usually at greater risk of being cut in the future.

Click here to see how much of LCNB’s profit it paid out over the last twelve months.

NasdaqCM:LCNB Historical dividend May 30, 2024

Have profits and dividends grown?

Companies with declining profits are riskier for dividend shareholders. If profits fall far enough, the company could be forced to cut its dividend. Readers will then understand why we are concerned about LCNB’s earnings per share decline of 10% per year over the past five years. Ultimately, as earnings per share decline, the size of the pie from which dividends can be paid shrinks.

The main way most investors will assess a company’s dividend prospects is to check the historical rate of dividend growth. Over the past decade, LCNB has increased its dividend by an average of about 3.2% per year. That’s intriguing, but the combination of growing dividends despite declining profits can usually only be achieved by paying out a larger percentage of profits. LCNB already pays out 99% of its profits, and given declining profits, we think it’s unlikely this dividend will grow quickly in the future.

Last takeaway

Does LCNB have what it takes to maintain its dividend payments? Not only are earnings per share shrinking, but LCNB is also paying out a disturbingly high percentage of its profits as dividends. Overall, we believe dividend investors should avoid companies in this situation, as high payout ratios and declining earnings can lead to a dividend cut. This isn’t an overtly attractive combination of features, and we’re just not that interested in this company’s dividend.

Although, if you are still interested in LCNB and want to learn more, it will be very helpful to know what risks this stock faces. Our analysis shows 4 Warning Signs for LCNB and you should be aware of this before buying shares.

A common investment mistake is buying the first interesting stock you see. Here you will find a complete list of high yield dividend stocks.

Valuation is complex, but we help make it simple.

Find out if LCNB may be over or undervalued by checking out our comprehensive analysis, including: fair value estimates, risks and cautions, dividends, insider transactions and financial health.

View the Free Analysis

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This article from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended as financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. We aim to provide you with targeted, long-term analysis based on fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or quality material. Simply Wall St has no positions in the stocks mentioned.

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