Oil-Dri Corporation of America (NYSE:ODC) has announced that it will be increasing its periodic dividend on the 23rd of August to $0.31, which will be 6.9% higher than last year’s comparable payment amount of $0.29. Although the dividend is now higher, the yield is only 1.7%, which is below the industry average.
View our latest analysis for Oil-Dri Corporation of America
Oil-Dri Corporation of America’s Earnings Easily Cover The Distributions
Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, Oil-Dri Corporation of America’s dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.
Over the next year, EPS could expand by 28.5% if recent trends continue. If the dividend continues on this path, the payout ratio could be 18% by next year, which we think can be pretty sustainable going forward.
Oil-Dri Corporation of America Has A Solid Track Record
Even over a long history of paying dividends, the company’s distributions have been remarkably stable. The annual payment during the last 10 years was $0.76 in 2014, and the most recent fiscal year payment was $1.16. This works out to be a compound annual growth rate (CAGR) of approximately 4.3% a year over that time. Although we can’t deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.
The Dividend Looks Likely To Grow
The company’s investors will be pleased to have been receiving dividend income for some time. Oil-Dri Corporation of America has seen EPS rising for the last five years, at 28% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.
Oil-Dri Corporation of America Looks Like A Great Dividend Stock
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.
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It’s important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we’ve picked out 1 warning sign for Oil-Dri Corporation of America that investors should know about before committing capital to this stock. Is Oil-Dri Corporation of America not quite the opportunity you were looking for? Why not check out 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.
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