An Examination of Dividend Performance and Sustainability
Lamb Weston Holdings Inc (LW, Financial) recently announced a dividend of $0.28 per share, payable on 2023-12-01, with the ex-dividend date set for 2023-11-02. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Lamb Weston Holdings Inc's dividend performance and assess its sustainability.
What Does Lamb Weston Holdings Inc Do?
Lamb Weston is the world's second-largest producer of branded and private-label frozen potato products, such as French fries, sweet potato fries, tater tots, diced potatoes, mashed potatoes, hash browns, and chips. The company also has a small appetizer business that produces onion rings, mozzarella sticks, and cheese curds. Including joint ventures, 63% of fiscal 2022 revenue was U.S.-based, with the remainder stemming from Europe, Canada, Japan, China, Korea, Mexico, among others. We estimate Lamb Weston's customer mix is 58% quick-serve restaurants, 18% full-service restaurants, 8% other food service (hotels, commercial cafeterias, arenas, schools), and 16% retail. Lamb Weston became an independent company in 2016 when it was spun off from Conagra.
A Glimpse at Lamb Weston Holdings Inc's Dividend History
Lamb Weston Holdings Inc has maintained a consistent dividend payment record since 2017. Dividends are currently distributed on a quarterly basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Lamb Weston Holdings Inc's Dividend Yield and Growth
As of today, Lamb Weston Holdings Inc currently has a 12-month trailing dividend yield of 1.20% and a 12-month forward dividend yield of 1.24%. This suggests an expectation of increased dividend payments over the next 12 months. Over the past three years, Lamb Weston Holdings Inc's annual dividend growth rate was 6.90%. Extended to a five-year horizon, this rate stayed the same.
Based on Lamb Weston Holdings Inc's dividend yield and five-year growth rate, the 5-year yield on cost of Lamb Weston Holdings Inc stock as of today is approximately 1.68%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-08-31, Lamb Weston Holdings Inc's dividend payout ratio is 0.16.
Lamb Weston Holdings Inc's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Lamb Weston Holdings Inc's profitability 8 out of 10 as of 2023-08-31, suggesting good profitability prospects. The company has reported positive net income for each of year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Lamb Weston Holdings Inc's growth rank of 8 out of 10 suggests that the company's growth trajectory is good relative to its competitors. Revenue is the lifeblood of any company, and Lamb Weston Holdings Inc's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Lamb Weston Holdings Inc's revenue has increased by approximately 12.60% per year on average, a rate that outperforms approximately 68.61% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Lamb Weston Holdings Inc's earnings increased by approximately 40.80% per year on average, a rate that outperforms approximately 78% of global competitors. Lastly, the company's 5-year EBITDA growth rate of 5.50% outperforms approximately 49.73% of global competitors.
Conclusion
In conclusion, Lamb Weston Holdings Inc's consistent dividend payments, impressive growth rate, low payout ratio, and high profitability and growth metrics suggest that the company's dividends are sustainable in the long term. These factors, combined with the company's strong growth prospects, make Lamb Weston Holdings Inc an attractive option for investors seeking reliable dividend income. However, as with all investments, it's crucial to conduct thorough research and consider the company's overall financial health before making a decision.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
