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Should You Buy Oppenheimer Holdings Inc. (NYSE:OPY) For Its Upcoming Dividend?

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Simply Wall St
·3 min read
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Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Oppenheimer Holdings Inc. (NYSE:OPY) is about to go ex-dividend in just four days. Ex-dividend means that investors that purchase the stock on or after the 11th of February will not receive this dividend, which will be paid on the 26th of February.

Oppenheimer Holdings's next dividend payment will be US$0.12 per share. Last year, in total, the company distributed US$0.48 to shareholders. Calculating the last year's worth of payments shows that Oppenheimer Holdings has a trailing yield of 1.3% on the current share price of $37.55. If you buy this business for its dividend, you should have an idea of whether Oppenheimer Holdings's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Oppenheimer Holdings

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. Oppenheimer Holdings is paying out just 4.9% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.

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.

Click here to see how much of its profit Oppenheimer Holdings paid out over the last 12 months.

historic-dividend
historic-dividend

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 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 Oppenheimer Holdings's earnings have been skyrocketing, up 61% per annum for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Oppenheimer Holdings has delivered an average of 0.9% 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 Oppenheimer Holdings is keeping back more of its profits to grow the business.

To Sum It Up

From a dividend perspective, should investors buy or avoid Oppenheimer Holdings? Companies like Oppenheimer Holdings that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Overall, Oppenheimer Holdings looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

In light of that, while Oppenheimer Holdings has an appealing dividend, it's worth knowing the risks involved with this stock. For instance, we've identified 2 warning signs for Oppenheimer Holdings (1 is significant) you should be aware of.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.