Olympia Financial Group Inc. (TSE:OLY) stock is about to trade ex-dividend in 4 days. You will need to purchase shares before the 19th of January to receive the dividend, which will be paid on the 29th of January.
Olympia Financial Group's upcoming dividend is CA$0.23 a share, following on from the last 12 months, when the company distributed a total of CA$2.76 per share to shareholders. Last year's total dividend payments show that Olympia Financial Group has a trailing yield of 6.9% on the current share price of CA$39.8. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Its dividend payout ratio is 84% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be concerned if earnings began to decline.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
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 Olympia Financial Group's earnings per share have risen 16% per annum over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Olympia Financial Group has lifted its dividend by approximately 3.3% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Olympia Financial Group is keeping back more of its profits to grow the business.
The Bottom Line
Has Olympia Financial Group got what it takes to maintain its dividend payments? Earnings per share are growing nicely, and Olympia Financial Group is paying out a percentage of its earnings that is around the average for dividend-paying stocks. Overall, Olympia Financial Group looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
In light of that, while Olympia Financial Group has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 2 warning signs for Olympia Financial Group that you should be aware of before investing in their shares.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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. 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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