Over the past 10 years Orkla ASA (OB:ORK) has been paying dividends to shareholders. The company is currently worth øre67.87b, and now yields roughly 3.8%. Should it have a place in your portfolio? Let’s take a look at Orkla in more detail.
5 questions to ask before buying a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has dividend per share amount increased over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Will it be able to continue to payout at the current rate in the future?
Does Orkla pass our checks?
The company currently pays out 75.8% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting a payout ratio of 68.6%, leading to a dividend yield of around 4.1%. Furthermore, EPS should increase to NOK3.66.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. In the case of ORK it has increased its DPS from NOK2.25 to NOK2.6 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes ORK a true dividend rockstar.
Compared to its peers, Orkla generates a yield of 3.8%, which is on the low-side for Food stocks.
With this in mind, I definitely rank Orkla as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three essential factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for ORK’s future growth? Take a look at our free research report of analyst consensus for ORK’s outlook.
- Valuation: What is ORK 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 ORK is currently mispriced by the market.
- Other 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 email@example.com.