Don't Buy Osisko Gold Royalties Ltd (TSE:OR) For Its Next Dividend Without Doing These Checks
It looks like Osisko Gold Royalties Ltd (TSE:OR) is about to go ex-dividend in the next three days. You can purchase shares before the 29th of September in order to receive the dividend, which the company will pay on the 15th of October.
Osisko Gold Royalties's next dividend payment will be CA$0.05 per share, and in the last 12 months, the company paid a total of CA$0.20 per share. Calculating the last year's worth of payments shows that Osisko Gold Royalties has a trailing yield of 1.3% on the current share price of CA$15.74. 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.
See our latest analysis for Osisko Gold Royalties
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Osisko Gold Royalties's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. It paid out 80% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Osisko Gold Royalties was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past six years, Osisko Gold Royalties has increased its dividend at approximately 8.9% a year on average.
Remember, you can always get a snapshot of Osisko Gold Royalties's financial health, by checking our visualisation of its financial health, here.
The Bottom Line
From a dividend perspective, should investors buy or avoid Osisko Gold Royalties? It's hard to get used to Osisko Gold Royalties paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Osisko Gold Royalties.
With that being said, if you're still considering Osisko Gold Royalties as an investment, you'll find it beneficial to know what risks this stock is facing. Case in point: We've spotted 1 warning sign for Osisko Gold Royalties 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.
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