Daily Stock Market Reports

The Estée Lauder Companies Inc. (NYSE:EL) Looks Like A Good Stock, And It’s Going


Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see The Estée Lauder Companies Inc. (NYSE:EL) is about to trade ex-dividend in the next 3 days. The ex-dividend date is one business day before a company’s record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn’t show on the record date. This means that investors who purchase Estée Lauder Companies’ shares on or after the 27th of May will not receive the dividend, which will be paid on the 15th of June.

The company’s next dividend payment will be US$0.60 per share. Last year, in total, the company distributed US$2.40 to shareholders. Based on the last year’s worth of payments, Estée Lauder Companies has a trailing yield of 1.0% on the current stock price of $237.21. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That’s why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Estée Lauder Companies

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Estée Lauder Companies has a low and conservative payout ratio of just 24% of its income after tax. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It distributed 43% of its free cash flow as dividends, a comfortable payout level for most companies.

It’s positive to see that Estée Lauder Companies’s dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

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

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NYSE:EL Historic Dividend May 23rd 2022

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it’s easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. It’s encouraging to see Estée Lauder Companies has grown its earnings rapidly, up 26% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Estée Lauder Companies has delivered an average of 20% per year annual increase in its dividend, based on the past 10 years of dividend payments. It’s great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Has Estée Lauder Companies got what it takes to maintain its dividend payments? Estée Lauder Companies has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it’s cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. There’s a lot to like about Estée Lauder Companies, and we would prioritise taking a closer look at it.

So while Estée Lauder Companies looks good from a dividend perspective, it’s always worthwhile being up to date with the risks involved in this stock. To that end, you should learn about the 3 warning signs we’ve spotted with Estée Lauder Companies (including 1 which is a bit unpleasant).

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

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.



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