Just Four Days Till ONE Gas, Inc. (NYSE:OGS) Will Be Trading Ex-Dividend
ONE Gas, Inc. (NYSE:OGS) stock is about to trade ex-dividend in four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, ONE Gas investors that purchase the stock on or after the 15th of August will not receive the dividend, which will be paid on the 1st of September.
The company's next dividend payment will be US$0.65 per share, and in the last 12 months, the company paid a total of US$2.60 per share. Looking at the last 12 months of distributions, ONE Gas has a trailing yield of approximately 3.4% on its current stock price of $76.09. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether ONE Gas has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for ONE Gas
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. ONE Gas paid out more than half (62%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. The good news is it paid out just 10% of its free cash flow in the last year.
It's positive to see that ONE Gas's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at ONE Gas, with earnings per share up 5.6% on average over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past nine years, ONE Gas has increased its dividend at approximately 9.8% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Final Takeaway
Is ONE Gas worth buying for its dividend? Earnings per share growth has been modest and ONE Gas paid out over half of its profits and less than half of its free cash flow, although both payout ratios are within normal limits. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.
While it's tempting to invest in ONE Gas for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 3 warning signs with ONE Gas and understanding them should be part of your investment process.
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.
