Yahoo Finance Oil-Dri Corporation of America (NYSE:ODC) Passed Our Checks, And It's About To Pay A US$0.29 Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Oil-Dri Corporation of America (NYSE:ODC) is about to trade ex-dividend in the next 4 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 Oil-Dri Corporation of America's shares before the 9th of May in order to receive the dividend, which the company will pay on the 24th of May.
The company's upcoming dividend is US$0.29 a share, following on from the last 12 months, when the company distributed a total of US$1.16 per share to shareholders. Based on the last year's worth of payments, Oil-Dri Corporation of America stock has a trailing yield of around 1.5% on the current share price of US$76.82. If you buy this business for its dividend, you should have an idea of whether Oil-Dri Corporation of America's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
See our latest analysis for Oil-Dri Corporation of America
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. Oil-Dri Corporation of America is paying out just 19% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 29% of its free cash flow as dividends, a comfortable payout level for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see how much of its profit Oil-Dri Corporation of America paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Oil-Dri Corporation of America's earnings have been skyrocketing, up 38% per annum for the past five years. Oil-Dri Corporation of America is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Oil-Dri Corporation of America has delivered an average of 4.3% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.
The Bottom Line
From a dividend perspective, should investors buy or avoid Oil-Dri Corporation of America? We love that Oil-Dri Corporation of America is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. It's a promising combination that should mark this company worthy of closer attention.
On that note, you'll want to research what risks Oil-Dri Corporation of America is facing. For example, we've found 1 warning sign for Oil-Dri Corporation of America that we recommend you consider before investing in the business.
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.
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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.
