Investors who want to cash in on Orkla ASA's (OB:ORK) upcoming dividend of øre2.60 per share have only 3 days left to buy the shares before its ex-dividend date, 26 April 2019, in time for dividends payable on the 07 May 2019. Should you diversify into Orkla and boost your portfolio income stream? Well, keep on reading because today, I'm going to look at the latest data and analyze the stock and its dividend property in further detail.
5 checks you should use to assess a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is their annual yield among the top 25% of dividend payers?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has dividend per share amount increased over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How does Orkla fare?
Orkla has a trailing twelve-month payout ratio of 80%, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 64% which, assuming the share price stays the same, leads to a dividend yield of around 4.1%. However, EPS should increase to NOK3.66, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you're eyeing out is reliable in its payments. ORK has increased its DPS from NOK2.25 to NOK2.6 in the past 10 years. It has also been paying out dividend consistently during this time, as you'd expect for a company increasing its dividend levels. These are all positive signs of a great, reliable dividend stock.
Relative to peers, Orkla produces a yield of 3.9%, which is on the low-side for Food stocks.
With these dividend metrics in mind, I definitely rank Orkla as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company's fundamentals and underlying business before making an investment decision. There are three important factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for ORK’s future growth? Take a look at our free research report of analyst consensus for ORK’s outlook.
- Valuation: What is ORK worth today? Even if the stock is a cash cow, it's not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether ORK is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.