London Stock Exchange Group plc (LON:LSEG) Goes Ex-Dividend Soon

Some investors rely on dividends for growing their wealth, and if you’re one of those dividend sleuths, you might be intrigued to know that London Stock Exchange Group plc (LON:LSEG) is about to go ex-dividend in just three days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company’s books as a shareholder in order to receive the 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. Thus, you can purchase London Stock Exchange Group’s shares before the 18th of August in order to receive the dividend, which the company will pay on the 20th of September.

The company’s upcoming dividend is UK0.32 a share, following on from the last 12 months, when the company distributed a total of UK0.95 per share to shareholders. Based on the last year’s worth of payments, London Stock Exchange Group has a trailing yield of 1.2% on the current stock price of 81.84. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for London Stock Exchange Group

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Last year, London Stock Exchange Group paid out 97% of its income as dividends, which is above a level that we’re comfortable with, especially if the company needs to reinvest in its business.

Generally, the higher a company’s payout ratio, the more the dividend is at risk of being reduced.

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

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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we’re encouraged by the steady growth at London Stock Exchange Group, with earnings per share up 8.2% on average over the last five years.

Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. London Stock Exchange Group has delivered an average of 14% per year annual increase in its dividend, based on the past 10 years of dividend payments. It’s encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Should investors buy London Stock Exchange Group for the upcoming dividend? London Stock Exchange Group has been growing earnings per share at a reasonable rate, but over the last year its dividend was not well covered by earnings. London Stock Exchange Group doesn’t appear to have a lot going for it, and we’re not inclined to take a risk on owning it for the dividend.

With that in mind though, if the poor dividend characteristics of London Stock Exchange Group don’t faze you, it’s worth being mindful of the risks involved with this business. Our analysis shows 2 warning signs for London Stock Exchange Group and you should be aware of them before buying any shares.

If you’re in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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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.