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Why Luxfer (LXFR) is a Great Dividend Stock Right Now

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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

Luxfer in Focus

Based in Manchester, Luxfer (LXFR - Free Report) is in the Industrial Products sector, and so far this year, shares have seen a price change of -20.4%. The materials technology company specializing in aluminum, magnesium and zirconium is currently shelling out a dividend of $0.13 per share, with a dividend yield of 3.38%. This compares to the Manufacturing - General Industrial industry's yield of 0.17% and the S&P 500's yield of 1.68%.

In terms of dividend growth, the company's current annualized dividend of $0.52 is up 4% from last year. In the past five-year period, 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 43%, meaning it paid out 43% 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 $1.44 per share, which represents a year-over-year growth rate of 11.63%.

Bottom Line

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide a quarterly payout.

Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that LXFR is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).


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