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Oil-Dri Corporation of America (NYSE:ODC) Is Increasing Its Dividend To US$0.28

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Oil-Dri Corporation of America's (NYSE:ODC) dividend will be increasing to US$0.28 on 26th of August. This takes the dividend yield from 4.0% to 4.0%, which shareholders will be pleased with.

View our latest analysis for Oil-Dri Corporation of America

Oil-Dri Corporation of America Doesn't Earn Enough To Cover Its Payments

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before this announcement, Oil-Dri Corporation of America was paying out 734% of what it was earning, and not generating any free cash flows either. This high of a dividend payment could start to put pressure on the balance sheet in the future.

Looking forward, EPS could fall by 41.0% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 1,346%, which could put the dividend under pressure if earnings don't start to improve.

historic-dividend
historic-dividend

Oil-Dri Corporation of America Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2012, the dividend has gone from US$0.68 to US$1.08. This means that it has been growing its distributions at 4.7% per annum over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

The Dividend Has Limited Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. Earnings per share has been sinking by 41% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Oil-Dri Corporation of America's Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think Oil-Dri Corporation of America's payments are rock solid. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 3 warning signs for Oil-Dri Corporation of America you should be aware of, and 1 of them makes us a bit uncomfortable. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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

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.