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Don't Race Out To Buy Orient Press Limited (NSE:ORIENTLTD) Just Because It's Going Ex-Dividend

Simply Wall St

Orient Press Limited (NSE:ORIENTLTD) is about to trade ex-dividend in the next 3 days. If you purchase the stock on or after the 12th of September, you won't be eligible to receive this dividend, when it is paid on the 21st of October.

Orient Press's next dividend payment will be ₹0.75 per share. Last year, in total, the company distributed ₹0.75 to shareholders. Based on the last year's worth of payments, Orient Press stock has a trailing yield of around 0.6% on the current share price of ₹125.6. If you buy this business for its dividend, you should have an idea of whether Orient Press's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Orient Press

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. Orient Press'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. Orient Press paid a dividend despite reporting negative free cash flow last year. That's typically a bad combination and - if this were more than a one-off - not sustainable.

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

NSEI:ORIENTLTD Historical Dividend Yield, September 8th 2019

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Orient Press reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

We'd also point out that Orient Press issued a meaningful number of new shares in the past year. It's hard to grow dividends per share when a company keeps creating new shares.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Orient Press's dividend payments per share have declined at 16% per year on average over the past 7 years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

We update our analysis on Orient Press every 24 hours, so you can always get the latest insights on its financial health, here.

To Sum It Up

From a dividend perspective, should investors buy or avoid Orient Press? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.

Want to learn more about Orient Press's dividend performance? Check out this visualisation of its historical revenue and earnings growth.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.