Last update on 2024-06-27

Lakeland Financial (LKFN) - Dividend Analysis (Final Score: 6/8)

Review of Lakeland Financial (LKFN) dividends with a high score of 6/8, analyzing performance and stability over two decades in the financial sector.

Short Analysis - Dividend Score: 6

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

Lakeland Financial (LKFN) has been evaluated based on 8 criteria to judge its dividend performance and stability. It scored a 6 out of 8. The analysis indicates: above industry average dividend yield (2.8238%), inconsistent but overall positive dividend growth rate (average 11.61%), sustainable average payout ratio (35.71%), well-covered dividends by earnings, improving coverage by cash flow, stable dividends without a 20%+ drop in 20 years, over 25 years of consistent payouts, and occasional but not consistent stock repurchase activity.

Insights for Value Investors Seeking Stable Income

Overall, Lakeland Financial shows strong financial health and commitment to returning value to shareholders through stable and growing dividends. Despite some inconsistencies in dividend growth and stock repurchases, the company stands out for maintaining a sustainable and reliable dividend policy. It is worth considering for investors seeking stable, income-generating stocks with a long-term positive trend in dividend payments.

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 measures the annual dividend payment relative to the stock price. A higher yield can be an indicator of a good income-generating stock.

Lakeland Financial's dividend yield of 2.8238% is higher than the industry average of 2.76%. Over the past 20 years, their dividend yield has fluctuated but generally grown, peaking at 3.5941% in 2009. This trend is favorable as it shows stability and growth in dividend payments, contributing positively to investors' income. The rising stock price from $11.77 in 2003 to $65.16 in 2023, along with increasing dividends per share from $0.2467 to $1.84, further supports the strength of their dividend yield. Overall, this is a good indicator of the company's financial health and appeal to dividend-seeking investors.

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

The dividend growth rate measures the annualized percentage rate of growth of a company's dividend payments. A steady or increasing dividend growth rate indicates financial health and shareholder value. A rate higher than 5% is generally considered favorable.

Analyzing the Dividend Ratio data provided, there is a noticeable inconsistency in growth over the 20-year period. The extreme fluctuations, such as 34.6705% in 2012 and -31.7255% in 2013, create an average growth of approximately 11.61%, which would overall exceed the 5% threshold. However, the volatility and negative growth years, such as 2009 (2.4794%) and 2015 (15.2377%), signify inconsistency. This inconsistency can be perceived negatively as it reflects unstable dividend policy and potentially financial instability. Hence, despite achieving an average above 5%, the overall trend is not steadily positive and indicates only sporadic gains, implying a mixed trend in this criterion.

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

Explain the criterion for Lakeland Financial (LKFN) and why it is important to consider

The Average Payout Ratio over the last 20 years is 35.71%, which is significantly below the benchmark of 65%. This trend reflects a consistent and sustainable dividend policy over the period. Lower payout ratios often signify that the company retains sufficient earnings for growth and reinvestment, increasing financial flexibility. It also indicates a prudent approach in ensuring that dividends are not overly reliant on current earnings, thus being more sustainable over the long term.

Dividends Well Covered by Earnings?

The payout ratio, or the proportion of earnings paid out as dividends to shareholders, is crucial for determining the sustainability of a company's dividend payments.

Analyzing the data spanning from 2003 to 2023, Lakeland Financial (LKFN) has maintained a relatively low payout ratio. Generally, a payout ratio of below 60% is considered healthy as it suggests that the company has abundant profits left after paying dividends, which can be utilized for growth or to navigate financial headwinds. The highest payout ratio over the given period was approximately 50.24% in the year 2023. Throughout most years, the payout ratio oscillated between roughly 24% to 39%. This indicates a conservative and sustainable approach, ensuring that dividends are well-covered by the earnings. It’s a favorable trend, reaffirming the company’s solid earning capabilities and dependable dividend payments.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow assesses whether the company's free cash flow is sufficient to cover the dividend payments, indicating financial stability.

Lakeland Financial's historical data on free cash flow and dividend payout amounts from 2003 to 2023 shows that the coverage ratio of dividends by free cash flow has varied. The ratios range from a low of 0.169 in 2013 to a high of 0.436 in 2023. While a coverage ratio of below 1 implies dividends are not fully covered by free cash flow, ratios close to or above 0.3 are generally considered healthier, especially when consistent. Over the observed period, Lakeland Financial has shown a relatively stable ability to cover dividends, seldom dipping below 0.2 and peaking significantly in 2023. This trend suggests improving or stable financial health and a generally good capacity to maintain or grow dividends, particularly notable with 2023's strong coverage ratio of 0.436. This upward trend is favorable and indicates robust cash flow management and sustainability in dividend payments.

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.

An assessment of the dividend per share (DPS) for Lakeland Financial over the last 20 years shows a steady upward trend. Notably, there hasn't been any year where the DPS dropped by 20% or more. For instance, beginning in 2003, the DPS was $0.2467 and consistently increased to $1.84 by 2023. Given the data, it appears that Lakeland Financial has responsibly managed its dividend payouts, ensuring stability and incremental growth, which is a positive trend for income-seeking investors.

Dividends Paid for Over 25 Years?

Explain the criterion for Lakeland Financial (LKFN) and why it is important to consider

Lakeland Financial has paid dividends consistently for the past 25 years, a significant achievement. This consistency reflects the company's financial stability and commitment to returning value to its shareholders. Over the years, the dividend per share has shown a general upward trend from $0.235 in 1998 to $1.84 in 2023. This steady increase indicates a good trend, showcasing the company's robust profitability and growth in earnings. Additionally, it aligns well with investors' preference for companies with stable and growing dividends. The increasing dividends provide a hedge against inflation and can be indicative of a strong underlying business performance.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for Lakeland Financial (LKFN) and why it is important to consider

Stock repurchases are an important indicator of a company's financial health and management's confidence in its future performance. When a company buys back shares, it is often returning excess capital to shareholders and signifying that it believes its stock is undervalued. Reliable stock repurchases can also contribute to an increase in Earnings Per Share (EPS) since there are fewer shares outstanding.In the context of Lakeland Financial (LKFN), the number of shares over the last 20 years shows that the company has had two specific years (2019 and 2020) of notable stock repurchase activity. In 2019, the number of shares decreased from approx. 25.727 million to approx. 25.469 million, and in 2020, they further reduced to approx. 25.462 million. These repurchases suggest that the company had excess capital and perceived its shares to be undervalued during these periods. However, the trend across the 20 years indicates that stock repurchases have not been a consistent strategy, and the average repurchase ratio of 1.9029% over the period is relatively modest. Although any level of buyback can positively impact shareholders, the lack of consistency could be seen as a negative when evaluating the reliability of stock repurchases as a component of LKFN's dividend policy.