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This is Why Luxfer (LXFR) is a Great Dividend Stock

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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Luxfer in Focus

Luxfer (LXFR - Free Report) is headquartered in Manchester, and is in the Industrial Products sector. The stock has seen a price change of -14.55% since the start of the year. The materials technology company specializing in aluminum, magnesium and zirconium is paying out a dividend of $0.13 per share at the moment, with a dividend yield of 3.15% compared to the Manufacturing - General Industrial industry's yield of 0.09% and the S&P 500's yield of 1.5%.

In terms of dividend growth, the company's current annualized dividend of $0.52 is up 4% from last year. Over the last 5 years, Luxfer has increased its dividend 2 times on a year-over-year basis for an average annual increase of 7.13%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Luxfer's current payout ratio is 41%. This means it paid out 41% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, LXFR expects solid earnings growth. The Zacks Consensus Estimate for 2022 is $1.35 per share, representing a year-over-year earnings growth rate of 4.65%.

Bottom Line

Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer a quarterly payout.

High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, LXFR presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).

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