Do These 3 Checks Before Buying Lifetime Brands, Inc. (NASDAQ:LCUT) For Its Upcoming Dividend

It looks like Lifetime Brands, Inc. (NASDAQ:LCUT) is about to go ex-dividend in the next three days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase Lifetime Brands' shares on or after the 1st of May 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. Calculating the last year's worth of payments shows that Lifetime Brands has a trailing yield of 2.5% on the current share price of US$6.84. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing. We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free. 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. 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. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If Lifetime Brands didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. Over the past year it paid out 116% of its free cash flow as dividends, which is uncomfortably high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level. View our latest analysis for Lifetime Brands Click here to see the company's payout ratio, plus analyst estimates of its future dividends. Have Earnings And Dividends Been Growing? When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. Lifetime Brands reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk. Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Lifetime Brands has increased its dividend at approximately 1.3% a year on average. Remember, you can always get a snapshot of Lifetime Brands's financial health, by checking our visualisation of its financial health, here. The Bottom Line Has Lifetime Brands got what it takes to maintain its dividend payments? It's hard to get used to Lifetime Brands paying a dividend despite reporting a loss over the past year. Worse, the dividend was not well covered by cash flow. Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor. Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Lifetime Brands. Be aware that Lifetime Brands is showing 2 warning signs in our investment analysis, and 1 of those doesn't sit too well with us... Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.