Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Lifetime Brands, Inc. (NASDAQ:LCUT) is about to trade ex-dividend in the next 2 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase Lifetime Brands' shares on or after the 30th of April will not receive the dividend, which will be paid on the 15th of May.

The company's next dividend payment will be US$0.0425 per share, on the back of last year when the company paid a total of US$0.17 to shareholders. Last year's total dividend payments show that Lifetime Brands has a trailing yield of 1.8% on the current share price of US$9.59. If you buy this business for its dividend, you should have an idea of whether Lifetime Brands's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Lifetime Brands's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. The good news is it paid out just 7.0% of its free cash flow in the last year.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Lifetime Brands was unprofitable last year, but at least the general trend suggests its earnings have been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Lifetime Brands has lifted its dividend by approximately 3.1% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Lifetime Brands is keeping back more of its profits to grow the business.

Get our latest analysis on Lifetime Brands's balance sheet health here.

To Sum It Up

Is Lifetime Brands worth buying for its dividend? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." In summary, while it has some positive characteristics, we're not inclined to race out and buy Lifetime Brands today.

In light of that, while Lifetime Brands has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 3 warning signs for Lifetime Brands (1 can't be ignored!) that you ought to be aware of before buying the shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.