Luxfer Holdings PLC (NYSE:LXFR) will pay a dividend of $0.13 on the 6th of November. This means the annual payment is 4.1% of the current stock price, which is above the average for the industry.

View our latest analysis for Luxfer Holdings

Luxfer Holdings' Projections Indicate Future Payments May Be Unsustainable

Estimates Indicate Luxfer Holdings' Could Struggle to Maintain Dividend Payments In The Future

Luxfer Holdings' Future Dividends May Potentially Be At Risk

A big dividend yield for a few years doesn't mean much if it can't be sustained. While Luxfer Holdings is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. This gives us some comfort about the level of the dividend payments.

Earnings per share is forecast to rise by 139.8% over the next year. If the dividend continues on its recent course, the company could be paying out several times what it earns in the next 12 months, which could start applying pressure to the balance sheet.

Luxfer Holdings Is Still Building Its Track Record

It is great to see that Luxfer Holdings has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2017, the dividend has gone from $0.50 total annually to $0.52. Its dividends have grown at less than 1% per annum over this time frame. Luxfer Holdings hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. Over the past five years, it looks as though Luxfer Holdings' EPS has declined at around 3.7% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

Luxfer Holdings' Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 2 warning signs for Luxfer Holdings that investors should know about before committing capital to this stock. Is Luxfer Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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