What To Know Before Buying oOh!media Limited (ASX:OML) For Its Dividend
Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. In the last few years oOh!media Limited (ASX:OML) has paid a dividend to shareholders. Today it yields 4.0%. Should it have a place in your portfolio? Let’s take a look at oOh!media in more detail.
See our latest analysis for oOh!media
5 questions to ask before buying a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
Is it paying an annual yield above 75% of dividend payers?
Has it paid dividend every year without dramatically reducing payout in the past?
Has the amount of dividend per share grown over the past?
Is is able to pay the current rate of dividends from its earnings?
Will it be able to continue to payout at the current rate in the future?
How well does oOh!media fit our criteria?
The company currently pays out 69% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect OML’s payout to fall to 53% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 5.0%. However, EPS should increase to A$0.21, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. The reality is that it is too early to consider oOh!media as a dividend investment. It has only been consistently paying dividends for 3 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, oOh!media produces a yield of 4.0%, which is on the low-side for Media stocks.
Next Steps:
Whilst there are few things you may like about oOh!media from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. I’ve put together three fundamental factors you should further research:
Future Outlook: What are well-informed industry analysts predicting for OML’s future growth? Take a look at our free research report of analyst consensus for OML’s outlook.
Valuation: What is OML worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether OML is currently mispriced by the market.
Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.