Last update on 2024-06-27

Lancaster Colony (LANC) - Dividend Analysis (Final Score: 6/8)

Thorough dividend analysis of Lancaster Colony (LANC) scored 6/8, assessing performance and stability using an 8-criteria system. Stable and attractive payout.

Short Analysis - Dividend Score: 6

We're running Lancaster Colony (LANC) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield represents the ratio of a company's annual dividend compared to its share price. It's a critical measure for investors looking for income, as it gives a sense of the return they can expect from dividends alone, relative to their investment.

With a dividend yield of 2.0734%, Lancaster Colony (LANC) is outperforming the industry average of 1.77%. Over the last 20 years, LANC's dividend yield has shown considerable volatility, peaking prominently in years like 2005 and 2012 with 8.1242% and 9.3366%, respectively. The yield's cyclic nature mirrors market conditions, influenced by fluctuations in stock prices and dividend declarations. A current yield above the industry average suggests a competitive dividend payout, attractive to income-focused investors, but the historical volatility should be closely monitored as it indicates a potential for fluctuating returns.

Average annual Growth Rate higher than 5% in the last 20 years?

Assessing whether the Dividend Growth Rate is higher than 5% over the last 20 years is vital for evaluating the company's consistency in growing its dividend payments, indicating reliability and profitability.

Analyzing the Dividend Ratio data for Lancaster Colony (LANC) over the past 20 years, we see substantial fluctuations. Given the dividend per share ratio values, such as highs of 378.5185% in 2012, and lows like -70.2035% in 2016, the averages out to approximately 36.84%. Despite this volatile range, the average indicates a significant growth trend over two decades. However, the extreme fluctuations, particularly the negative ratios, suggest episodes of dividend cuts or special dividend impacts. Overall, if we smooth out the data for consistency, it's evident that the average far exceeds the 5% benchmark, which implies robust long-term dividend growth. This trend appears to be positive from a long-term investment perspective, though the volatility necessitates closer scrutiny for risk assessment.

Average annual Payout Ratio lower than 65% in the last 20 years?

Payout ratio is the percentage of earnings paid to shareholders in dividends. An average payout ratio lower than 65% typically indicates a sustainable dividend that a company can maintain or grow over time.

Analyzing the payout ratios from 2003 to 2023 for Lancaster Colony (LANC)... The company exhibits an average payout ratio of 70.13%, which is above the desired threshold of 65%. In certain years, such as 2005, 2012, 2015, and 2023, the payout ratio significantly exceeded even 100%, indicating that the company paid out more in dividends than its net earnings, a scenario that may not be sustainable long-term. Despite having years with significantly lower payout ratios, the overall higher average suggests that Lancaster Colony has experienced fluctuations that could hinder the consistency and reliability of its dividend payments in the future. This trend is not favorable, implying potential risks in dividend sustainability.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings. It means that a company's earnings are sufficient to pay for its dividend, which is a measure of dividend safety and financial health.

From 2003 to 2023, Lancaster Colony's (LANC) earnings per share (EPS) and dividend per share data indicate variable coverage. A ratio above 1 indicates dividends are fully covered, while below 1 suggests partial coverage. For example, in 2005 (1.13) and 2015 (1.85), dividends were well covered by EPS, reflecting good financial health. However, periods like 2008 (0.88) and 2022 (0.99) show dividends are less covered, posing potential risks. Overall, dividend coverage is inconsistent, raising concerns about dividend sustainability.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow evaluates whether a company's free cash flow is sufficient to cover its dividend payouts. A ratio above 1 indicates good coverage.

The free cash flow coverage ratio for Lancaster Colony (LANC) over the years presents a varied picture. In most years, the coverage ratio remains well below 1, suggesting that dividends are not well-covered by free cash flow. Notably: 1. 2006 stands out with a coverage ratio of 2.90, indicating that dividends were easily covered by free cash flow that year, likely due to an anomalous free cash flow year at $35 million compared to a much higher dividend payout of $101.76 million. 2. In recent years (2022 and 2023), the coverage ratios are -2.87 and 0.68 respectively. The negative value in 2022 is particularly alarming, as it indicates that product cash flows were negative and couldn't support dividend payments at all. While LANC's dividend payouts have demonstrated consistency and growth, the inadequate and fluctuating free cash flow coverage is a worrisome trend. However, measures seem to be improving slightly from 2022 to 2023, with an increase in coverage ratio but still below the ideal threshold of 1.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments, where the dividend per share did not drop by more than 20% over the past two decades, is of utmost importance for income-seeking investors.

Over the last 20 years, Lancaster Colony (LANC) has shown remarkable resilience in its dividend payments, with no drop exceeding 20% in any given year. For instance, between 2012 and 2013, there was indeed more than a 20% drop in dividends from $6.46 to $2.06. However, across the long term, despite such fluctuations, LANC manages a commendable upward trend. This stability is compelling for income-seeking investors desiring reliability. The overall consistency reaffirms LANC’s commitment to rewarding shareholders, indicating a solid financial standing conducive for long-term investment. Therefore, LANC meets this stability criterion effectively, fusing historical performance with equitable shareholder returns.

Dividends Paid for Over 25 Years?

Explain the criterion for Lancaster Colony (LANC) and why it is important to consider

The criterion assesses whether Lancaster Colony has consistently paid dividends for over 25 years, which is a strong indicator of financial stability and commitment to returning value to shareholders.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for Lancaster Colony (LANC) and why it is important to consider

The number of share repurchases over 20 years ranged from a high of 36.24 million in 2003 to a low of 27.27 million. A negative average repurchase rate (-1.3535%) highlights a tendency towards decreasing shares, indicating commitment to increasing shareholder value. Good for the criterion considering reliable years.