It looks like ORBIS AG (ETR:OBS) is about to go ex-dividend in the next four days. The ex-dividend date is usually set to be two business days 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase ORBIS’ shares before the 29th of May in order to be eligible for the dividend, which will be paid on the 2nd of June.
The company’s next dividend payment will be €0.10 per share, and in the last 12 months, the company paid a total of €0.10 per share. Based on the last year’s worth of payments, ORBIS has a trailing yield of 2.1% on the current stock price of €4.76. If you buy this business for its dividend, you should have an idea of whether ORBIS’s dividend is reliable and sustainable. So we need to investigate whether ORBIS can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. ORBIS paid out a comfortable 29% of its profit last year. A useful secondary check can be to evaluate whether ORBIS generated enough free cash flow to afford its dividend. What’s good is that dividends were well covered by free cash flow, with the company paying out 16% of its cash flow last year.
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.
See our latest analysis for ORBIS
Click here to see how much of its profit ORBIS paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we’re glad to see ORBIS’s earnings per share have risen 10% per annum over the last five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.