Readers hoping to buy Old Republic International Corporation (NYSE:ORI) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, Old Republic International investors that purchase the stock on or after the 8th of March will not receive the dividend, which will be paid on the 21st of March.
The company's upcoming dividend is US$0.265 a share, following on from the last 12 months, when the company distributed a total of US$0.98 per share to shareholders. Based on the last year's worth of payments, Old Republic International stock has a trailing yield of around 3.4% on the current share price of US$29.22. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately Old Republic International's payout ratio is modest, at just 46% of profit.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see Old Republic International's earnings per share have risen 12% per annum over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Old Republic International has delivered an average of 3.1% per year annual increase in its dividend, based on the past 10 years of dividend payments. Earnings per share have been growing much quicker than dividends, potentially because Old Republic International is keeping back more of its profits to grow the business.
Final Takeaway
Has Old Republic International got what it takes to maintain its dividend payments? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. Old Republic International ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
On that note, you'll want to research what risks Old Republic International is facing. Our analysis shows 1 warning sign for Old Republic International and you should be aware of it before buying any shares.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.