The board of Louisiana-Pacific Corporation (NYSE:LPX) has announced that it will be paying its dividend of $0.28 on the 13th of March, an increased payment from last year's comparable dividend. Despite this raise, the dividend yield of 1.1% is only a modest boost to shareholder returns.

See our latest analysis for Louisiana-Pacific

Louisiana-Pacific's Payment Could Potentially Have Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Louisiana-Pacific's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 19.9% over the next year. If the dividend continues on this path, the payout ratio could be 17% by next year, which we think can be pretty sustainable going forward.

Louisiana-Pacific Is Still Building Its Track Record

Louisiana-Pacific's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The annual payment during the last 7 years was $0.52 in 2018, and the most recent fiscal year payment was $1.12. This means that it has been growing its distributions at 12% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

Louisiana-Pacific Could Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Louisiana-Pacific has been growing its earnings per share at 5.2% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Louisiana-Pacific's prospects of growing its dividend payments in the future.

Our Thoughts On Louisiana-Pacific's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Earnings growth generally bodes well for the future value of company dividend payments. See if the 11 Louisiana-Pacific analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is Louisiana-Pacific not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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