It looks like Old Republic International Corporation (NYSE:ORI) is about to go ex-dividend in the next 3 days. This means that investors who purchase shares on or after the 6th of March will not receive the dividend, which will be paid on the 16th of March.
Old Republic International's next dividend payment will be US$0.21 per share. Last year, in total, the company distributed US$0.80 to shareholders. Looking at the last 12 months of distributions, Old Republic International has a trailing yield of approximately 4.3% on its current stock price of $19.72. If you buy this business for its dividend, you should have an idea of whether Old Republic International's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Old Republic International is paying out just 23% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Old Republic International's earnings per share have risen 17% per annum over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Old Republic International has delivered 2.1% dividend growth per year on average over the past ten years. Earnings per share have been growing much quicker than dividends, potentially because Old Republic International is keeping back more of its profits to grow the business.
The Bottom Line
From a dividend perspective, should investors buy or avoid Old Republic International? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. We think this is a pretty attractive combination, and would be interested in investigating Old Republic International more closely.
Wondering what the future holds for Old Republic International? See what the two analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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.
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